What entries are made for the forfeiture of shares and their reissue?
What entries are made for the forfeiture of shares and their reissue?
No entries are made on forfeiture but when the shares are reissued, the cash received is credited to Equity Share Capital Account. Give the rectifying entry. Thus, Bank has been correctly debited.
What ways forfeited shares are reissued?
There are four situations in which re-issue of shares take place.
- Forfeited shares reissued at discount when originally issued at par.
- Shares reissued at par or at premium, when originally issued at par.
- Forfeited shares reissued at par, at discount and at premium when originally issued at premium.
Can forfeited shares be reissued?
The forfeited shares can be reissued by the company at any price. But in no case, the amount collected on the reissue of such shares plus the amount already forfeited be less than the amount credited as paid upon reissue of shares.
What is the accounting treatment to be passed for forfeiture of shares if they were issued at discount?
It may be recalled that when the shares are issued at discount ‘Discount on shares A/c’ is given debit, which implies that share capital is raised at loss. On forfeiture of such shares, Discount on shares A/c is credited with the amount of discount originally debited on forfeited shares.
What is the entry of reissue of share?
Journal Entries for Re-issue of Forfeited Shares:
| Date | Particulars | |
|---|---|---|
| 1. On re-issue of shares | Bank A/c (Actual amount received) | Dr. |
| Forfeited Shares A/c (loss on re-issue) | Dr. | |
| To Share Capital A/c | Cr. | |
| (Being ….. forfeited shares re-issued @ ₹…each as per the Board’s Resolution no… dated….) |
What is the minimum price at which a company can reissue its forfeited shares?
The Company can reissue its fortified shares at par, at premium or at discount but the reissue price together with the amount already received on such shares should not be less than the called up amount on each share.
How the profit on reissue of forfeited shares can be treated in accounts?
If a Company makes any loss on reissue of shares, such loss is made good by making adjustments by debiting the Forfeited Shares Account. The balance remaining the forfeited Share Account is a capital profit and it must be transferred to Capital Reserve Account.
What is maximum permissible discount on reissue of shares?
65 is the unpaid amount. Now on reissue of such shares at discount, the maximum discount could be Rs. 35.
When shares are forfeited share capital account is?
When shares are forfeited, share capital account is debited. Explanation: Share Capital Account represents the liability of the company as it is the amount that is borrowed from the public. Therefore, at the time of forfeiture of shares, it is debited with a called-up amount.
What is profit on reissue of shares?
Forfeited shares can be re-issued. Any amount of profit on re-issue is a capital receipt and should be transferred to capital reserve account because this profit is a capital gain for the company.
Can a company reissue shares at discount?
The board of directors of the company while reissuing the shares decide the price of reissue. These shares can be reissued at par, at premium or at discount. Generally, these shares are reissued at a discount i.e. at a price which is less than its nominal value.
Can a forfeited share be reissued at any price?
The forfeited shares can be reissued by the company at any price. But in no case, the amount collected on the reissue of such shares plus the amount already forfeited be less than the amount credited as paid upon reissue of shares.
What are journal entries of forfeiture and reissue of shares?
Today, we are taking an important example for explaining the journal entries of forfeiture and reissue of shares. But before study this, you should study our past corporate Accounting study material which will clear you the fundamental of Forfeiture and Reissue of Shares accounting.
What happens to the forfeited shares of a company?
The directors of the company are empowered to re-issue the forfeited shares if authorized by its articles. A forfeited share may be sold or otherwise disposed of, on such terms and in such manner as the Board thinks fit. Such shares may be re-issued at par, at a premium or even at a discount.
How does share forfeiture affect the capital reserve?
The reason is that the company can re-issue these shares at a discount and it will adjust this amount from the Share Forfeiture A/c. When a company re-issues different categories of shares, it will transfer the amount to Capital Reserve only in respect of the category of shares re-issued.