What is the entry for forfeiture of shares?

When Forfeiture of shares Issued at Par The company debits the Share Capital Account with the amount called-up up to the date of forfeiture on shares. It credits the Shares Allotment Amount or Shares Call Account with amount called-up on forfeited shares but due from the shareholders.

What is the treatment of forfeiture account?

Accounting Treatment for Forfeiture Points to be noted: If the company maintains a Calls in Arrears account, then that account will be credited with the unpaid portion of the amount instead of Share Allotment A/c or Share Call A/c.

Where is share forfeiture in balance sheet?

The share forfeited A/c is shown in the liabilities side in Balance Sheet under the heading ‘share capital’. It is added to paid up capital until all the forfeited shares are not re-issued.

What is the accounting treatment done to share Application Account?

Accounting treatment of Securities Premium

• The company can use the amount towards the issue of un-issued shares to the shareholders or members of the company as fully paid bonus shares.
• It can use this amount to write off the preliminary expenses.

What are the effects of forfeiture of shares?

– The liability of a person whose shares have been forfeited comes to an end when the company receives the payment in full of all such money in respect of shares forfeited. – A member is liable for unpaid calls even after the forfeiture of shares.

What is forfeiture of share with example?

What Is a Forfeited Share? For example, a forfeiture may occur if a shareholder fails to pay an owed allotment (call money), or if he sells or transfers his shares during a restricted period.

How is share forfeiture account calculated?

1. Share forfeited Amount = 200 ×9 = 1800.
2. Share forfeited Amount = 200 × 2 = Rs. 400.
3. (b) Clean chem Ltd. forfeited 500 shares of Rs 10 each, for non-payment of first call of Rs. 3 and final call of Re. Pass necessary journal entries.

Which type of account is share forfeiture?

equity share investment
A forfeited share is an equity share investment which is cancelled by the issuing company. A share is forfeited when the shareholder fails to pay the subscription money called upon by the issuing company.

How is share forfeiture amount calculated?

How do you account for share capital transactions?

Share capital is reported by a company on its balance sheet in the shareholder’s equity section. The information may be listed in separate line items depending on the source of the funds. These usually include a line for common stock, another for preferred stock, and a third for additional paid-in capital.

How do you account for issue of shares?

To account for the proceeds from the issue of shares up to their nominal value (face value). To account for the proceeds from the issue of shares over and above their nominal value (face value)….Initial Issue.

In what circumstances can a company forfeited its shares?

A company can forfeit its shares only when the following conditions are satisfied:

• Authority to Forfeit: The power to forfeit must be expressly given in the Articles.
• Default in Payment of Calls: The shares can be forfeited only for the non-payment of calls and not for the default in payment of any other debts.

How does accounting entry on forfeiture of share work?

Accounting Entries on Forfeiture of Share. 1 The company debits the Share Capital Account with the amount called-up up to the date of forfeiture on shares. 2 It credits the Shares Allotment Amount or Shares Call Account with amount called-up on forfeited shares but due from the shareholders. If we are

What are the conditions of forfeiture of shares?

The conditions of forfeiture of shares are Forfeiture of shares issued at par, Forfeiture of shares issued at discount and Forfeiture of shares issued at premium. The board of directors of the company is empowered to reissue the forfeited shares if authorized by its articles. Such shares may be issued either at par or at premium or at discount.

How are forfeited shares credited to the share capital account?

The total called-up amount for a forfeited share (s) is debited from its share capital account. This total called-up amount for forfeiture of a share (s) is credited to the relevant share forfeiture account. Vitally, these are in effect only when a shareholder or owner is unable to clear their called-up amount.

How are shares forfeited in articles of association?

The Articles of Association of almost every Company reserve the right of forfeiture of the shares for non-payment of call money within a stated period. The following conditions must be satisfied for the valid forfeiture of shares: 1. The power to forfeit shares must be expressly given in Articles of Association of the Company. 2.