Sunena, a shareholder holding shares of each, did not pay the allotment money of per share (including a premium of ) and the first and final call of . Her shares were forfeited after the first and final call. Choose the correct journal entry for forfeiture of the shares.
- A\begin{array}{llc} \text{Share Capital A/c} & \text{Dr.} & 5,000 \ \text{Securities Premium A/c} & \text{Dr.} & 1,000 \ \quad \text{To Share Allotment A/c} && 2,000 \ \quad \text{To Share first and final Call A/c} && 2,500 \ \quad \text{To Share Forfeiture A/c} && 1,500 \end{array}
- B\begin{array}{llc} \text{Share Capital Reserve A/c} & \text{Dr.} & 5,000 \ \text{Securities Premium A/c} & \text{Dr.} & 1,000 \ \quad \text{To Share Allotment A/c} && 4,000 \ \quad \text{To Share Forfeiture A/c} && 2,000 \end{array}
- C\begin{array}{llc} \text{Share Capital A/c} & \text{Dr.} & 5,000 \ \text{Securities Premium A/c} & \text{Dr.} & 1,000 \ \quad \text{To Share Allotment A/c} && 2,000 \ \quad \text{To Share Forfeiture A/c} && 4,000 \end{array}
- D\begin{array}{llc} \text{Share Capital A/c} & \text{Dr.} & 5,000 \ \text{Securities Premium A/c} & \text{Dr.} & 1,000 \ \quad \text{To Share Allotment A/c} && 2,000 \ \quad \text{To Share first and final Call A/c} && 1,500 \ \quad \text{To Share Forfeiture A/c} && 2,500 \end{array}
Solution & Step-by-step Explanation
Let's compute individual value components for the forfeited shares:Share Capital Account (Debit): Debited by total called-up face value.
Securities Premium Account (Debit): Since the allotment money was not paid, the premium was not received. Hence, it must be debited to cancel it.
To Share Allotment Account (Credit): Total amount unpaid on allotment.
To Share First & Final Call Account (Credit): Total amount unpaid on call.
To Share Forfeiture Account (Credit): This acts as the balancing figure representing the amount already received on application.
Matching this analysis against Option 4, the entry is completely correct.
Securities Premium Account (Debit): Since the allotment money was not paid, the premium was not received. Hence, it must be debited to cancel it.
To Share Allotment Account (Credit): Total amount unpaid on allotment.
To Share First & Final Call Account (Credit): Total amount unpaid on call.
To Share Forfeiture Account (Credit): This acts as the balancing figure representing the amount already received on application.
Matching this analysis against Option 4, the entry is completely correct.