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Ramesh to whom 200 shares were alloted failed to pay allotment and first call money.The amount was payable as 6 on application(including 2 premium),6 on allotment (including 2 premium) and 2 on first and final call.pass the entry for forfietures
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Ramesh to whom 200 shares were alloted failed to pay allotment and fir...
Forfeiture of Shares
When a shareholder does not pay the required amount of money on shares, the company has the right to forfeit the shares. Forfeiture means cancellation of shares and the shareholder loses all the rights and privileges associated with the shares.
Entry for Forfeiture of Shares
When shares are forfeited, the following entry is passed:
- Debit: Share Forfeiture Account
- Credit: Share Capital Account (being the share forfeited)
- Credit: Share Allotment Account (being the allotment money received)
- Credit: Share First Call Account (being the first call money received)
Explanation of the Entry
- Debit: Share Forfeiture Account - This account is debited with the nominal value of the shares forfeited. It represents the amount of money that the shareholder failed to pay.
- Credit: Share Capital Account - This account is credited with the nominal value of the shares forfeited. It represents the reduction in the share capital of the company.
- Credit: Share Allotment Account - This account is credited with the allotment money received. It represents the amount of money that was paid by the shareholder at the time of allotment.
- Credit: Share First Call Account - This account is credited with the first call money received. It represents the amount of money that was paid by the shareholder at the time of the first call.
After the shares are forfeited, the company can either re-issue them or cancel them. If the company re-issues the shares, it must first offer them to the original shareholder who failed to pay for them. If the shareholder does not want to purchase the shares, the company can sell them to someone else.
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Ramesh to whom 200 shares were alloted failed to pay allotment and fir...
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Ramesh to whom 200 shares were alloted failed to pay allotment and first call money.The amount was payable as 6 on application(including 2 premium),6 on allotment (including 2 premium) and 2 on first and final call.pass the entry for forfietures?
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