Q30
1 markMCQSection A

In the Notes to Accounts, the amount to be shown under 'Share Forfeiture Account' will be :

Accounting for Share Capital
Share Forfeiture Account

Options

(A)Rs. 32,000
(B)Rs. 12,000
(C)Rs. 44,000
(D)Rs. 29,000
Official Answer

Correct option: (D) Rs. 29,000.


  • Aditi (4,000 shares): paid only Rs. 2 application money → amount forfeited = 4,000×24,000 \times 2 = Rs. 8,000.
  • Rohit (3,000 shares): paid Rs. 2 application + Rs. 5 allotment = Rs. 7 per share → amount forfeited = 3,000×73,000 \times 7 = Rs. 21,000.
  • Total Share Forfeiture Account = 8,000+21,0008,000 + 21,000 = Rs. 29,000.
share forfeiture accountamount received before forfeitureapplication moneyallotment moneycall in arrears

Marking Scheme

  • 11 mark for selecting (D) Rs. 29,000 with the correct shareholder-wise computation.

Hint

Credit the Share Forfeiture Account only with what was actually received per share before forfeiture — Rs. 2 for Aditi, Rs. 7 for Rohit — not the full face value.

Quick Oral Answer

Share Forfeiture Account = Rs. 8,000 (Aditi, application only) + Rs. 21,000 (Rohit, application + allotment) = Rs. 29,000.

Analysis & Explanation

The Share Forfeiture Account is credited with whatever amount a shareholder had actually paid on the shares before those shares were forfeited for non-payment of a subsequent call.


Why (D) is correct


  • Aditi paid only the application money (Rs. 2/share) on her 4,000 shares before forfeiture: Rs. 8,000.
  • Rohit paid application and allotment (Rs. 2 + Rs. 5 = Rs. 7/share) on his 3,000 shares, having defaulted only on the call: Rs. 21,000.
  • Together: Rs. 29,000, matching option (D).

Why the distractors are wrong


  • (A) Rs. 32,000 and (C) Rs. 44,000 do not match any consistent combination of the per-share amounts actually paid by Aditi and Rohit.
  • (B) Rs. 12,000 understates the amount, possibly from mixing up the two shareholders' paid amounts.

Common Mistakes

  1. 1Crediting the Share Forfeiture Account with the full face value of the forfeited shares instead of only the amount actually paid.
  2. 2Mixing up Aditi's and Rohit's amounts paid — Aditi paid less (only application) while Rohit paid more (application + allotment).

Interesting Facts

The Share Forfeiture Account is a capital-nature account — it is never treated as income, even though the company effectively keeps money for which no shares are currently outstanding to the defaulting shareholder.

On reissue, only the discount actually allowed on reissue is debited to this account; any surplus left after reissue is transferred to Capital Reserve, which can never be used for dividend distribution.

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Frequently Asked Questions

Why is Rohit's forfeited amount higher than Aditi's?

Rohit had already paid both application (Rs. 2) and allotment (Rs. 5), a total of Rs. 7 per share, and defaulted only on the call. Aditi paid only application money (Rs. 2 per share) and defaulted on both allotment and call — so her forfeited amount per share is lower.