Forfeiture of Shares -Issued at Premium

& Issued at Discount

COMPANY ACCOUNTING

ACM 202

Submitted By : T.Guru Aarat 142063

What is a share ?

Capital of a company is divided into units or parts of equal amount. Every unit/part is called a share.

According to Section 2(84) of the Companies Act, a ‘share’ means a share in the share capital of a company and includes stock.

It is an ownership security.

Types of Shares

Preference Shares:

Equity Shares:

What is Forfeiture of Shares ? If a shareholder fails to pay instalments the

shares held by him , his shares are compulsorily forfeited as penalty and his membership from the company is cancelled.

After forfeiture of shares shareholder does not have any right on the money already paid by him on such shares.

Forfeiture might be of ::

1. Shares Issued At Par

2. Shares Issued At Premium

3. Shares Issued At Discount

Forfeiture of shares issued at premium :

There are 2 cases which might arise :

1. When money for premium has already been received on forfeited shares.

2. When money for premium has not been received on forfeited shares.

When money for premium has been received on forfeited shares : Shares Capital a/c Dr.

To Unpaid Calls a/c

To Share Forfeiture a/c

When money for premium has not been received :

Share Capital a/c Dr.

Security Premium a/c Dr.

To Unpaid Calls a/c

To Share Forfeiture a/c

Forfeiture of Shares originally issued at discount

This topic is irrelevant now.

Section 53 of The Companies Act, 2013 prohibits issue of equity shares at a discount.

Forfeiture of Shares Issued at a Discount :

Share Capital a/c Dr.

To Discount on Issue Of Shares a/c

To Unpaid Calls a/c

To Shares Forfeited a/c

Reissue of Forfeited Shares(a) Reissue at par :

Bank A/c Dr.

To Share Capital A/c

(Being forfeited shares reissued at par)

(b) Reissue at premium:Bank A/c Dr.

To Share Capital A/c

To Security Premium A/c

(Being forfeited shares reissued at premium)

(C) Reissue at Discount :Bank A/c Dr.Share Forfeited A/c Dr. (Discount

on reissue)To Share Capital A/c

(Being forfeited shares reissued at discount)

Re-issue (of shares originally issued at discount) at a discount This topic is irrelevant now. Section 53 of The Companies Act, 2013

prohibits issue of equity shares at a discount.

Profit on Reissue of Shares or Capital Reserve

Share Forfeited A/c Dr.

To Capital Reserve A/c

(Being profit on reissued shares transferred to Capital Reserve A/c)

(1) Capital Reserve = Amount forfeited on re-issued shares - Discount on re-issue

(2) Capital Reserve, When shares originally issued at discount are re-issued at discount:

Capital Reserve = Amount forfeited on reissued shares – Excess Discount on re-issue

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