Accounting: Reissue of Forfeited Shares: At Premium and at Par, Originally Issued at Par (For CBSE, ICSE, IAS, NET, NRA 2022)

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In this case the total amount received on reissue of shares that has been credited to Share Forfeited A/c will be transferred to Capital Reserve A/c. Because no discount is given on reissue.

Example:

Y Ltd. forfeited 400 shares of ₹ 20 each, on which ₹ 15 per share have been received and balance remains due but not paid. These shares were reissued

(a) at the rate of ₹ 20 per share i.e.. at par

(b) at the rate of ₹ 24 per share i.e.. at premium

Make necessary journal entries for reissue of the shares

Solution:

Journal Entries

Reissue of Forfeited Shares at Par, at Discount and at Premium, Originally Issued at Premium

  • If the shares are issued at premium originally, they need not be reissued at premium. They can be issued at par or at premium or at discount.
  • If shares are reissued at par, then the amount received will be credited to the Share Forfeited A/c and then transferred to Capital Reserve A/c
  • If shares are issued at discount the amount of discount allowed will be adjusted towards the amount credited to share forfeited A/c the balance amount of Share Forfeited A/c will be transferred to Capital Reserve A/c.
  • If shares are reissued at premium, the premium received will be credited to Securities Premium A/c.
Reissue of Forfeited Shares at Par, at Discount and at Premi …

Example:

AZ Ltd. forfeited 200 shares of ₹ 10 each originally issued at a premium of ₹ 4 per share, the holder of which paid ₹ 3 per share on application but did not pay the allotment money of ₹ 7 per share (including premium) and call of ₹ 4 per share. Make necessary journal entries for the forfeiture and for reissue of these shares if:

I. Reissued at ₹ 10 per share i.e.. at par

II. Reissued at ₹ 8 per share i.e.. at discount

III. Reissued at ₹ 12 per share i.e.. at premium

Solution:

Journal Entries Solution

In this case no amount to be adjusted towards discount so ₹ 600 will be the capital gain to the firm and that will be transferred to Capital Reserve A/c.

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