The amount of 'Share Capital' presented in the Balance sheet of Dharma Ltd. under 'Shareholders Funds' will be :
The amount of 'Share Capital' presented in the Balance sheet of Dharma Ltd. under 'Shareholders Funds' will be :
Options
Correct option: (B) Rs. 8,59,000.
- Amount received on forfeited shares before forfeiture: Aditi (4,000 shares × Rs. 2 application) = Rs. 8,000; Rohit (3,000 shares × Rs. 7 application + allotment) = Rs. 21,000; Total Share Forfeiture Account = Rs. 29,000.
- Share Capital shown under Shareholders' Funds = Subscribed and fully paid (Rs. 8,30,000) + Share Forfeiture Account balance (Rs. 29,000) = Rs. 8,59,000.
Marking Scheme
- 11 mark for selecting (B) Rs. 8,59,000, reflecting correct addition of the forfeited-shares amount to fully paid capital.
Hint
Balance Sheet Share Capital = Subscribed and fully paid capital + balance in the Share Forfeiture Account (amount received before forfeiture).
Quick Oral Answer
Share Capital in the Balance Sheet equals fully paid capital of Rs. 8,30,000 plus the Rs. 29,000 forfeited but retained from Aditi and Rohit, giving Rs. 8,59,000.
Analysis & Explanation
Under Schedule III, the Share Capital figure appearing on the face of the Balance Sheet under 'Shareholders' Funds' is not simply the fully-paid subscribed capital — it also includes the amount forfeited (and not yet reissued), since that money still belongs to the company as part of paid-up capital.
Why (B) is correct
- Fully paid capital (Rs. 8,30,000) + amount forfeited and retained (Rs. 29,000, being Rs. 8,000 from Aditi + Rs. 21,000 from Rohit) = Rs. 8,59,000, the actual total paid-up value the company has received and shows as Share Capital.
Why the distractors are wrong
- (A) Rs. 8,30,000 omits the Share Forfeiture Account balance.
- (C) Rs. 9,00,000 wrongly treats all shares as fully paid.
- (D) Rs. 30,00,000 is the authorised capital, never shown as the Balance Sheet total.
Common Mistakes
- 1Reporting only the fully-paid subscribed capital (Rs. 8,30,000) and forgetting to add the Share Forfeiture Account balance.
- 2Adding back the full face value of the forfeited shares (Rs. 70,000) instead of only the actual amount received before forfeiture (Rs. 29,000).
Interesting Facts
The Share Forfeiture Account is disclosed as an addition to Share Capital in the Notes to Accounts, not shown as a separate liability or reserve — it stays with the shareholders' funds until the shares are reissued.
On reissue of forfeited shares, any remaining credit balance in the Share Forfeiture Account (after adjusting reissue discount) is transferred to Capital Reserve, a permanent, non-distributable reserve.
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Frequently Asked Questions
Why is the Share Forfeiture Account added to Share Capital rather than shown separately?
Because the amount already received on forfeited shares remains part of the company's paid-up funds contributed by shareholders; Schedule III therefore adds it to Share Capital as a single combined figure until the shares are reissued or the balance moves to Capital Reserve.