Turorial 1, march 2015 questions and answers acct 2006. In this lesson, you will learn how to solve a question when a company reissue forfeited shares. A forfeited share is a share in a company that the owner loses forfeits by failing to meet the purchase requirements. Forfetire and reissue of shares 10 note a public limited company cannot make any allotment of shares unless the amount of minimum subscription stated in the prospectus has been subscribed and the sum payable as application money for such shares has been paid to and received by the company. The shares, thus forfeited, may either be canceled or reissued. The ownership of a company is broken into units we know as shares. If a shareholder fails to pay allotment money or a call or. Ts grewal solutions for class 12 accountancy company. If forfeited shares are reissued at a discount, the amount of discount can, in no case, exceed the amount credited to shares forfeited account. Share forfeited is a process by which the company after the approval of the board of directors cancels or forfeits the shares of an individual and is usually is done when there is a noncompliance with the purchase requirements like a failure in payment of allotment money, failure in payment of call money, selling or transferring shares during the restricted. These shares represent a part of the company, so the shareholder becomes a part owner. Explain forfeiture of shares issued at discount and premium.
Reissue of forfeited shares requirements of companies. The balance of share forfeited account after the reissue of forfeited shares is transferred to i general reserve ii capital redemption reserve iii capital reserve. The auditor should ascertain whether the articles authorize the board of directors to reissue the forfeited shares. Introduction of issueforfeiture and reissue of shares. The fixed value of a share is printed on the share certificate and is called nominal par face value of a share. Ncert solutions for class 12 accountancy part ii chapter 1. Terms of issue of shares i issue of shares at par when shares are issued at their face value, the shares are said to have been issued at par. On forfeiture, we need to cancel the shares and to that extent, reduce the share capital.
Journal entries on forfeiture or surrender and reissue of shares 3. Issue and forfeiture and reissued of shares preferred stock. This document is highly rated by b com students and has been viewed 2057 times. Discount thus allowed on re issue has to be debited to shares forfeited account. The directors would fix a price for the forfeited share that should not be lower than the amount of the calls due and unpaid on the share at the time of forfeiture. Reissue part of shares and capital reserve students forum. Reissue of forfeited shares part 1 important for ugc net. After the forfeiture of shares, the company is under an obligation to dispose off the forfeited shares. Accounting for share capital important questions for cbse class 12 accountancy accounting treatment of issue shares. Forfeiture of shares originally issued at premium due to nonpayment of dues. Issue by instalments, oversubscription, forfeiture. In the case of a company whose shares are listed in a recognized stock exchange, re issue of forfeited shares shall be as per guidelines for preferential issue of the.
These online mcq tests includes all main concepts of the issue, forfeiture and reissue of shares in ca cpt fundamentals of accounting. Journal entry bonus to dr shareholders ac share capital ac cr share premium ac cr being bonus utilised for issue of bonus shares at premium forfeiture and re issue of shares by becoming a shareholder a person enters into a contract with the company that he is liable to pay full price of the share to the company from time to time and as. Forfeited shares meaning, examples journal entries. Public applied for 4,50,000 shares and allotment was made to. Of the shares forfeited, 1,000 share were reissued as fully paidup for rs. Forfeiture of shares reissue of forfeited shares issue for consideration. Forfeited shares are available with the company for sale. Calculation of profit on re issue when different categories of shares are reissued. Ncert solutions for class 12 accountancy part ii chapter 1 accounting for share capital. Therefore, no return of allotment is required to be filed with roc by a company at the time of re issue or disposal of forfeited shares. Share capital of oak ltd at 31 march 2017 was as follows.
It also forfeits the money received on forfeited shares till the date of forfeiture. In case the previous shareholder whose shares had been forfeited requests the company to cancel the forfeiture, the board can nullify the forfeiture if it thinks that this is in the interest of the company. The company offered for public subscription all the shares. Introduction to forfeiture and reissue of shares 2. Issue forfeiture of shares financial capital capital. Required discuss the benefits to a company from forfeiting and reissuing shares, and prepare journal entries to record the forfeiture and reissue above. The amount received by the company is not refunded. Classxii accounts all videos, notes and test mcqs available on our mobile app.
Our notes and mcq test series are now available on app anurag classes download our app anurag classes from. Auditors duty regarding reissue of forfeited shares. Notes on share forfeiture and reissue of forfeited shares grade. Selling of these forfeited shares is called reissue of forfeited shares. Discuss the law relating to forfeiture of shares and the. Consequently, the company may opt for reissue of shares. The board of directors can sell reissue or dispose of forfeited shares on such terms as it thinks fit. Credit balance of forfeited shares cannot be considered a surplus until the shares forfeited have been re issued, dr. Discount on reissue to share capital ac being forfeited shares reissued at discount re issue of shares originally issued at discount at a discount this topic is irrelevant now. The auditors duty as to the re issue of forfeited shares is described as follows. If the shareholder still does not pay, the company may forfeit the shares by passing an appropriate resolution. Reissue of forfeited shares is not allotment of shares but fundamentals of accounting.
Issue of shares by cacma santosh kumar download chapter pdf. This document is highly rated by ca foundation students and has been viewed 1287 times. In this, it may be noted that the amount of discount allowed cannot exceed the amount that had been received on forfeited shares at the time of initial issue. Capital funds provided by the owners into a business. But the loss on reissue cannot exceed the gain on forfeiture of the share reissued. Balance on fs account for 150 shares 3,750 150x25 set off of loss on reissue of 150 shares 1500 150x20 balance left to be transferred to capital reserve 2,250. If applicants fail to pay the allotment amount and the shareholders fail to pay the call money, then the company can forfeit such shares. The title of the purchaser to the forfeited shares is not affected by any irregularity or invalidity in the forfeiture or sale of the shares. Ts grewal solutions for class 12 accountancy company account accounting for share capital volume ii question 1. These shares represent a part of the company, so the shareholder becomes a. What is the maximum amount of discount at which forfeited. Re issue of forfeited shares share forfeiture ac 30.
Forfeiture of shares issued at premium and at discount. Liabilities assets share capital 100 bank 120 reserves and surplus share premium 20 120 120 shares issued at discount. Requirements may include paying an allotment or call money. When shares are reissued, return of the forfeited shares need not be filed under section 75 1 of the companies act, 1956. Issueforfeiture and reissue of shares issueforfeiture. Noor khan limited company was established with authorized capital of 100,000 shares and invited applications for 10,000 shares of 10 each at premium of rs. Issue and forfeiture and reissued of shares free download as powerpoint presentation. The reason is that the company can re issue these shares at a discount and it will adjust this.
There are two cases for issue of shares at premium. Issue, forfeiture and reissue of shares online tests for ca cpt fundamentals of accounting. Forfeiture of shares issued at a premium with entry and. Day 34 forfeiture and reissue of shares class 12 accounting of share capital. The issue of shares at discount is authorised by a resolution. However, in the case of forfeited shares, they had already been allotteed and they had come into existence at the time of their allotment and their forfeiture is a proof of their existence. Forfeited shares can be reissued as fully paid at a par, premium or discount. Then forfeited shares become property of the company and the company can reissue those forfeited shares to general public again. The fixed value of a share, printed on the share certificate, is called nominal par face value of a share. But the face value of the share is rs 100, so selling the share to pragya for a price below rs 40 amounts to issue of shares at a discount. As in the absence of any provisions to the contrary, provisions of table a apply. Section 53 of the companies act, 20 prohibits issue of equity shares at a discount.
The board of directors of the company is empowered to reissue the forfeited shares if authorized by its articles. Till the time the company reissues the forfeited shares. Day 34 forfeiture and reissue of shares class 12 accounting of. Ideal cpt accounts issue, forfeiture and reissue of shares 207 calculation of profit on reissue of forfeited shares. The re issue of forfeited shares is treated as re sale and not the allotment, and therefore, no return of allotment of re issue of forfeited shares need be filed with the registrar of companies.
It is a capital gain and is credited to forfeited shares account. However, the amount receivable on re issue of such shares together with the amount already received from the defaulting member, shall not, in any case, be less than the face value of the shares. Forfeiture of shares problems and solutions accountancy. The forfeiture of shares does not necessarily reduce the share capital since they may be reissued. In case the shares were issued at premium and the premium money has become due but has not been paid by defaulting shareholder, then any credit already given to securities premium reserve account must be debited cancelled at the time of forfeiture of shares.
Sometimes on nonpayment of call money, we see forfeiture and reissue of shares. Forfetire and reissue of shares 4 share capital total capital of the company is divided into a number of small indivisible units of a fixed amount and each such unit is called a share. Notes on share forfeiture and reissue of forfeited shares. In this article we will discuss about the forfeiture and reissue of shares. Accounting for share capital for class 12 29 lessons 5 h 16 m. 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 company cannot treat the credit balance in the share forfeiture ac until it re issues the forfeited shares.
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