Multiple choice

Tata Limited issued a prospectus offering 20,000 shares of Rs. 10 each at a par payable as follow: On application and allotment Rs. 2; on first call Rs. 4 and on final call Rs. 4. Sumesh, the holder of 1000 equity shares did not pay the amount due on both the calls. These 1000 shares were forfeited by the Board of Directors and these 1000 shares were subsequently reissued at Rs. 9 per share. Which is incorrect entry related to forfeiture and re-issue?

  1. Share Capital A/c 10,000 To Share First Call A/c 4,000 To Share Final Call A/c Rs. 4,000 To Forfeited Share A/c 2,000

  2. Bank A/c Rs. 9,000 Forfeited Share A/c 1,000 To Share Capital A/c Rs.10,000

  3. Forfeited Share A/c Rs.2,000 To Capital Reserve A/c 2,000

  4. Share Application and Allotment A/c 2,000 To Forfeited Share A/c 2,000
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

 The amount paid on forfeited shares simply transferred to Forfeited Share A/c but no need to debit Share Application and Allotment A/c.

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