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If a shareholder does not pay his dues on allotment, for the amount due, there will be a ________.
- a)Credit balance in the share allotment account
- b)Debit balance in the share forfeiture account
- c)Credit balance in the share forfeiture account
- d)Debit balance in the share allotment account
Correct answer is option 'D'. Can you explain this answer?
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If a shareholder does not pay his dues on allotment, for the amount du...
Explanation:
When a shareholder does not pay his dues on allotment, it leads to a situation of default. In such a case, the company has the right to forfeit the shares allotted to the shareholder. Forfeiture means that the company cancels the shares allotted to the shareholder and reissues them to someone else.
The accounting treatment for such a situation involves the creation of two accounts - share allotment account and share forfeiture account. Let's understand the accounting treatment in detail:
Debit balance in the share allotment account:
When a shareholder does not pay his dues on allotment, the amount due is recorded in the share allotment account. The share allotment account is a nominal account that records the amount received from shareholders at the time of allotment. Thus, if a shareholder does not pay his dues on allotment, there will be a debit balance in the share allotment account.
Credit balance in the share forfeiture account:
When a company forfeits the shares allotted to a shareholder, it creates a share forfeiture account. The share forfeiture account is a nominal account that records the forfeiture of shares. The amount received on forfeiture is credited to this account. Thus, when a shareholder does not pay his dues on allotment and the shares are forfeited, there will be a credit balance in the share forfeiture account.
Conclusion:
Hence, the correct answer is option 'D' - debit balance in the share allotment account. When a shareholder does not pay his dues on allotment, it leads to a default situation, and the company records the amount due in the share allotment account. The share forfeiture account is created when the shares are forfeited, and the amount received on forfeiture is credited to this account.
When a shareholder does not pay his dues on allotment, it leads to a situation of default. In such a case, the company has the right to forfeit the shares allotted to the shareholder. Forfeiture means that the company cancels the shares allotted to the shareholder and reissues them to someone else.
The accounting treatment for such a situation involves the creation of two accounts - share allotment account and share forfeiture account. Let's understand the accounting treatment in detail:
Debit balance in the share allotment account:
When a shareholder does not pay his dues on allotment, the amount due is recorded in the share allotment account. The share allotment account is a nominal account that records the amount received from shareholders at the time of allotment. Thus, if a shareholder does not pay his dues on allotment, there will be a debit balance in the share allotment account.
Credit balance in the share forfeiture account:
When a company forfeits the shares allotted to a shareholder, it creates a share forfeiture account. The share forfeiture account is a nominal account that records the forfeiture of shares. The amount received on forfeiture is credited to this account. Thus, when a shareholder does not pay his dues on allotment and the shares are forfeited, there will be a credit balance in the share forfeiture account.
Conclusion:
Hence, the correct answer is option 'D' - debit balance in the share allotment account. When a shareholder does not pay his dues on allotment, it leads to a default situation, and the company records the amount due in the share allotment account. The share forfeiture account is created when the shares are forfeited, and the amount received on forfeiture is credited to this account.
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If a shareholder does not pay his dues on allotment, for the amount due, there will be a ________.a)Credit balance in the share allotment accountb)Debit balance in the share forfeiture accountc)Credit balance in the share forfeiture accountd)Debit balance in the share allotment accountCorrect answer is option 'D'. Can you explain this answer? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about If a shareholder does not pay his dues on allotment, for the amount due, there will be a ________.a)Credit balance in the share allotment accountb)Debit balance in the share forfeiture accountc)Credit balance in the share forfeiture accountd)Debit balance in the share allotment accountCorrect answer is option 'D'. Can you explain this answer? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for If a shareholder does not pay his dues on allotment, for the amount due, there will be a ________.a)Credit balance in the share allotment accountb)Debit balance in the share forfeiture accountc)Credit balance in the share forfeiture accountd)Debit balance in the share allotment accountCorrect answer is option 'D'. Can you explain this answer?.
If a shareholder does not pay his dues on allotment, for the amount due, there will be a ________.a)Credit balance in the share allotment accountb)Debit balance in the share forfeiture accountc)Credit balance in the share forfeiture accountd)Debit balance in the share allotment accountCorrect answer is option 'D'. Can you explain this answer? for CA Foundation 2025 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about If a shareholder does not pay his dues on allotment, for the amount due, there will be a ________.a)Credit balance in the share allotment accountb)Debit balance in the share forfeiture accountc)Credit balance in the share forfeiture accountd)Debit balance in the share allotment accountCorrect answer is option 'D'. Can you explain this answer? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for If a shareholder does not pay his dues on allotment, for the amount due, there will be a ________.a)Credit balance in the share allotment accountb)Debit balance in the share forfeiture accountc)Credit balance in the share forfeiture accountd)Debit balance in the share allotment accountCorrect answer is option 'D'. Can you explain this answer?.
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If a shareholder does not pay his dues on allotment, for the amount due, there will be a ________.a)Credit balance in the share allotment accountb)Debit balance in the share forfeiture accountc)Credit balance in the share forfeiture accountd)Debit balance in the share allotment accountCorrect answer is option 'D'. Can you explain this answer?, a detailed solution for If a shareholder does not pay his dues on allotment, for the amount due, there will be a ________.a)Credit balance in the share allotment accountb)Debit balance in the share forfeiture accountc)Credit balance in the share forfeiture accountd)Debit balance in the share allotment accountCorrect answer is option 'D'. Can you explain this answer? has been provided alongside types of If a shareholder does not pay his dues on allotment, for the amount due, there will be a ________.a)Credit balance in the share allotment accountb)Debit balance in the share forfeiture accountc)Credit balance in the share forfeiture accountd)Debit balance in the share allotment accountCorrect answer is option 'D'. Can you explain this answer? theory, EduRev gives you an
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