The document discusses the process of forfeiting shares when shareholders do not pay amounts owed for shares. Key points: - A company can cancel shares if shareholders do not pay amounts owed, as long as the articles of association allow it. - The company must give 14 days' notice to the shareholder to pay outstanding amounts plus interest before forfeiting shares. - After forfeiture, the shareholder's name is removed from the member register and they cease to be a company member. Forfeited shares become the company's property.

1. Forfieture

2. Forfeiture of shares
• When shareholders cannot pay the amount for shares company can
cancel those shares
• Only of AOA allows the company to do so
• Notice of 14 days need to be given by the company to shareholder to
pay amount along with interest
• After that , no payment made company can forfeit the shares
• Shareholders name is removed from the registrar of members
• A resolution is passed by the board for the forfeiture
• Amount paid by shareholder not repaid but forfeited

3. • Journal entry :
Share Capital a/c (called up amount)
To Share forfeited a/c (with amount received )
To Call in Arrears (amount unpaid)
10,000 shares of 10 each are to be forfeited for non payment of first
call. The amount payable was Rs 3 on application, 3 on allotment, 2 on
first call and balance on second and final call . Pass the journal entry

4. Effects of forfeiture
• Shareholder with effect Ceases to be the member of the company
• Membership cancelled
• Shares become the property of the company. The amount already
collected remains as a gain for the company

5. Forfeiture of shares issued at par
Share Capital a/c (called up amount)
To Share forfeited a/c (with amount received )
To unpaid calls(amount unpaid)
(being shares forfeited for non payment of calls)
A ltd forfeited 500 shares of 10 each which where originally issued at par for
non payment of allotment Rs 2 , 1st call Rs 4and final call Rs 2.Journalise
XYZ is a shareholder in Kiran Ltd holding 2000 sares of 10 each . He has paid
Rs 2 and Rs 3 per share on application and allotment but failed to pay Rs 3
and Rs 2 per share for first and second call respectively. Directors forfeit his
shares

6. Forfeiture of shares issued at premium
• Share premium received and credited to share premium account cannot be
cancelled even on forfeiture’
• However share premium credited to premium account but not actually
received should be cancelled at the time of forfeiting the shares
• If premium account credited but amount not actually received then,
Share Capital a/c (called up amount)
Securities premium a/c (premium due but unpaid)
To Share forfeiture a/c
To unpaid calls a/c
(being shares forfeited for non payment of calls inclusive of share premium)

7. • Laksmi ltd forfeited 200 shares of 10 each (originally issued at 20% premium
payable with allotment for non payment of allotment of Rs 5 including premium
and first and final call of Rs 3.
Ambassador Ltd issued 2000 shares of 100 each at a premium of 10% payable as
follows:
25-Application
35- Allotment including premium
20- First call
30 –Final call
1800 shares were applied for and allotted .All money was received with exception
of first and final calls on 200 shares held by Raghu. These shares where forfeited.

8. If share premium was received but forfeiture is due to non payment of
subsequent calls
Share capital a/c……………..Dr
To share forfeiture a/c
To unpaid calls a/c
(Being forfeiture of shares for non payment of calls)