This Presentation highlights the accounting treatment for the forfeiture, reissue and surrender of shares in the case of a company.

1. PRESENTATION ON JOURNAL
ENTRIES OF SHARE CAPITAL
Presented By:
Ms. Komal Mahajan
Asst. Prof. in Commerce

2. If a shareholder fails to pay the due amount of allotment or any call on
shares
issued by the company, the Board of directors may decide to cancel
his/her membership of the company. With the cancellation, the defaulting
shareholder also loses the amount paid by him/her on such shares. Thus,
when a shareholder is deprived of his/her membership due to non payment
of calls, it is known as forfeiture of shares.
1. Forfeiture of shares issued at Par
When shares issued at par are forfeited the accounting treatment will be
as follows:
(i) Debit Share Capital Account with amount called up (whether received
or not) per share up to the time of forfeiture.
(ii) Credit Share Forfeited A/c. with the amount received up to the time
of forfeiture.
(iii) Credit ‘Unpaid Calls A/c’ with the amount due on forfeited shares.
FORFEITURE OF SHARES

3. journal entry is :
Share Capital A/c Dr (Amount called up)
To Share forfeited A/c (Amount paid)
To Unpaid calls A/c (Amount called but not paid)
(Being shares forfeited)
Note : (i) Amount called up = No. of shares × called
up per share
(ii) Amount paid = No. of shares × Amount paid per
share
(iii) Amount called but not paid = No. of shares ×
Amount called
but not paid per share

4. 2. Premium on shares has not been received and stands credited to Securities Premium A/c as
due but not paid.
When a share is forfeited on which the amount of premium has
been made due but has not been received, either wholly or
partially, the Securities Premium A/c will be cancelled. At the time
of making due, Securities Premium A/c will be credited.
The journal entry will be as follows:
Share Capital A/c Dr. (Amount called up)
Securities Premium Reserve A/c Dr. (Premium not received)
To Share forfeited A/c (Amount paid)
To Unpaid calls A/c (Amount called but not paid)
(Being shares forfeited)

5. REISSUE OF FORFEITED SHARES
Forfeited shares may be reissued by the company directors for
any amount bit if such shares are issued at a discount then the
amount of discount should not exceed the actual amount
received on forfeited shares plus original discount on reissued
shares, if any.
The following journal entry will be passed :
Bank a/c Dr. (amount received)
Share forfeited a/c(loss on issue)
To share capital a/c( with face value of shares )
To securities premium a/c(if shares are reissued at
premium)
(Being forfeited shares reissued)

6. REISSUE OF FORFEITED SHARES
After the reissue if there is no balance in shares forfeited
account then there will be no capital profit. But where there is
profit on the reissue of forfeited shares, such a profit is treated
as a capital profit and balance or amount relating to shares
reissued will be transferred to capital reserve by following entry
:
Case I: If all forfeited shares are reissued
Share Forfeited a/c
To capital reserve a/c
(Being credit amount of share forfeited a/c on forfeiture less
debit amount of share forfeited a/c on reissue)

7. REISSUE OF FORFEITED SHARES
Case II: If part of forfeited shares are reissued
Share Forfeited a/c
To capital reserve a/c
(Being credit amount of share forfeited a/c on forfeiture less
debit amount of share forfeited a/c on reissue)
Amount will be calculated as follows:
Proportionate Amount forfeited(on shares reissued) =
Total forfeited amount/Total No. of shares forfeited*No. of
shares reissued
Capital Reserve Amount= Proportionate amount forfeited –
reissue discount

8. Forfeiture v/s Surrender of shares
Basis of
Difference
Forfeiture of
shares
Surrender of shares
Meaning It is compulsory
termination of
membership, due to non
payment of call money
on due date.
It is a voluntary return of
shares by a member to
the company.
Nature of Action It is a compulsory action
by the company.
It is voluntary action by
the share holder.
Reason Forfeiture takes place
because of non-payment
of call money on the due
date.
Surrender takes place
due to the inability of a
shareholder to pay the
call money.

9. Forfeiture v/s Surrender of shares
Basis of
Difference
Forfeiture of shares Surrender of shares
Initiative Company is taking the
initiative
Initiative is taken by
shareholder.
Time Required Forfeiture requires longer
time.
Requires comparatively
less time.
Effect Forfeiture affects the
reputation of a share
holder, as it is a penal
action by the company.
Surrender of shares does
not affect the reputation
of the shareholder, as it is
his own voluntary action.