A company forfeited 100 equity shares of Rs.10 each issued at a premium of 20% for non-payment of final call of Rs.5 including the premium. Show the journal entry for forfeiture of shares.
Calculation of Amounts:
Face Value per share: Rs.10 Premium (20%): Rs.2 per share Final Call: Rs.5 (including Rs.2 premium) Capital portion of Final Call: Rs.5 - Rs.2 = Rs.3
Amount Received per share:
- Called-up Capital = Rs.10
- Unpaid Capital = Rs.3
- Amount Received = Rs.10 - Rs.3 = Rs.7
For 100 Shares:
- Share Capital debited = 100 × Rs.10 = Rs.1,000
- Calls in Arrears credited = 100 × Rs.3 = Rs.300
- Share Forfeiture credited = 100 × Rs.7 = Rs.700
Journal Entry:
| Date | Particulars | L.F. | Dr. (Rs.) | Cr. (Rs.) |
|---|---|---|---|---|
| Share Capital A/c Dr. | 1,000 | |||
| To Calls in Arrears A/c | 300 | |||
| To Share Forfeiture A/c | 700 | |||
| (Being 100 shares forfeited for non-payment of final call of Rs.5 including premium) |
Explanation
As per the context, when shares are forfeited, Share Capital Account is debited with the called-up amount. Since the premium was included in the unpaid final call, it was NOT received, so Securities Premium Account is NOT involved. The credit goes to Calls in Arrears (unpaid amount) and Share Forfeiture Account (amount already received). The capital portion of final call is Rs.3 (Rs.5 - Rs.2 premium), and amount received per share is Rs.7 (Rs.10 - Rs.3).
Solution Steps
Step 1: Calculate premium per share = 20% of Rs.10 = Rs.2
Step 2: Determine capital portion of final call = Rs.5 - Rs.2 = Rs.3
Step 3: Calculate amount received per share = Rs.10 - Rs.3 = Rs.7
Step 4: Calculate total amounts for 100 shares - Share Capital: Rs.1,000; Calls in Arrears: Rs.300; Share Forfeiture: Rs.700
Step 5: Pass journal entry debiting Share Capital and crediting Calls in Arrears and Share Forfeiture