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Asha Ltd. issued shares of Rs. 100 each at a premium of 25%. Mamta, who has 2,000 shares of Asha ltd., failed to pay first and final call totalling Rs.5. Premium was taken by Asha Ltd. at the time of allotment. On forfeiture of Mamta’s shares, the amount to be debited to Share premium account will be (a) Rs.5,000 (b) Rs.10,000 (c) Rs.15,000 (d) Nil?
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Asha Ltd. issued shares of Rs. 100 each at a premium of 25%. Mamta, wh...
Forfeiture of Shares and Share Premium Account


Forfeiture of shares refers to the cancellation of shares by the company due to the non-payment of calls by the shareholder. In such a scenario, the shareholder loses the ownership of the shares and the company can sell them to recover the amount due.


The share premium account is created when the company issues shares at a premium, i.e., at a price higher than the face value of the share. The premium collected is treated as capital and is credited to the share premium account. This account can be used for various purposes such as the issue of bonus shares, writing off the preliminary expenses, etc.


Calculation of Amount to be Debited to Share Premium Account


In the given scenario, Asha Ltd. issued shares of Rs. 100 each at a premium of 25%. This means that the issue price of each share was Rs. 125. Mamta, who has 2,000 shares of Asha Ltd., failed to pay first and final call totalling Rs. 5. As per the terms of the issue, the company can forfeit the shares and recover the amount due.


Now, when the shares are forfeited, the company cancels them and reduces its share capital. The amount received on the forfeiture of shares is credited to the Share Forfeiture Account. In this case, the amount received will be:


Amount received on forfeiture of shares = Number of forfeited shares x Face value per share
= 2,000 x Rs. 100
= Rs. 2,00,000

Out of this amount, the company can adjust the amount due from Mamta, i.e., Rs. 5. The remaining amount will be transferred to the Capital Reserve Account. The entry for forfeiture of shares will be:


Share Forfeiture Account Dr. 2,00,000
To Share Capital Account 2,00,000
(For forfeiture of 2,000 shares of Rs. 100 each)

Now, since the shares were issued at a premium, the premium collected at the time of issue needs to be adjusted. As per the Companies Act, 2013, the amount of premium received on the issue of shares cannot be refunded to the shareholders. However, it can be utilised for the following purposes:



  • Issue of fully paid bonus shares to the shareholders

  • Writing off the preliminary expenses of the company

  • Providing for the premium payable on the redemption of preference shares or debentures

  • Providing for the premium payable on the redemption of shares or debentures



In this case, since the premium was collected at the time of issue, it cannot be used for the issue of bonus shares or for writing off the preliminary expenses. Also, there is no provision for the redemption of shares or debentures. Hence, the only option available is to transfer the amount to the Capital Reserve Account.


Thus, the amount to be debited to the Share Premium Account will be:


Amount to be debited to Share Premium Account = Total premium collected - Premium adjusted on forfeiture
= 2,00,000 x
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D Ltd. issued 2,00,000 shares of Rs.100 each at a premium of Rs.20 per share payable as follows :On application Rs.20On allotment Rs.50 (including premium)On first call Rs.30On second and final call Rs.20Applications were received for 3,00,000 shares and pro rata allotment was made to applicants of 2,40,000 shares. Money excess received on application was employed on account of sum due on allotment as part of share capital. E, to whom 4,000 shares were allotted, failed to pay the allotment money and on his subsequent failure to pay the first call, his shares were forfeited and F, the holder of 6,000 shares failed to pay the two calls and his shares were forfeited after the second call. Of the forfeited shares, 8,000 shares were reissued to G at a discount of 10%, the whole of Es forfeited shares being reissued.Q.Amount transferred to Share forfeiture account at the time of forfeiting Fs shares = _________.

D Ltd. issued 2,00,000 shares of Rs.100 each at a premium of Rs.20 per share payable as follows :On application Rs.20On allotment Rs.50 (including premium)On first call Rs.30On second and final call Rs.20Applications were received for 3,00,000 shares and pro rata allotment was made to applicants of 2,40,000 shares. Money excess received on application was employed on account of sum due on allotment as part of share capital. E, to whom 4,000 shares were allotted, failed to pay the allotment money and on his subsequent failure to pay the first call, his shares were forfeited and F, the holder of 6,000 shares failed to pay the two calls and his shares were forfeited after the second call. Of the forfeited shares, 8,000 shares were reissued to G at a discount of 10%, the whole of Es forfeited shares being reissued.Q.Amount transferred to Share forfeiture account at the time of forfeiting Es shares = _________.

D Ltd. issued 2,00,000 shares of Rs.100 each at a premium of Rs.20 per share payable as follows :On application Rs.20On allotment Rs.50 (including premium)On first call Rs.30On second and final call Rs.20Applications were received for 3,00,000 shares and pro rata allotment was made to applicants of 2,40,000 shares. Money excess received on application was employed on account of sum due on allotment as part of share capital. E, to whom 4,000 shares were allotted, failed to pay the allotment money and on his subsequent failure to pay the first call, his shares were forfeited and F, the holder of 6,000 shares failed to pay the two calls and his shares were forfeited after the second call. Of the forfeited shares, 8,000 shares were reissued to G at a discount of 10%, the whole of Es forfeited shares being reissued.Q.Net balance in Share Forfeiture Account = ________.

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Asha Ltd. issued shares of Rs. 100 each at a premium of 25%. Mamta, who has 2,000 shares of Asha ltd., failed to pay first and final call totalling Rs.5. Premium was taken by Asha Ltd. at the time of allotment. On forfeiture of Mamta’s shares, the amount to be debited to Share premium account will be (a) Rs.5,000 (b) Rs.10,000 (c) Rs.15,000 (d) Nil?
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Asha Ltd. issued shares of Rs. 100 each at a premium of 25%. Mamta, who has 2,000 shares of Asha ltd., failed to pay first and final call totalling Rs.5. Premium was taken by Asha Ltd. at the time of allotment. On forfeiture of Mamta’s shares, the amount to be debited to Share premium account will be (a) Rs.5,000 (b) Rs.10,000 (c) Rs.15,000 (d) Nil? 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 Asha Ltd. issued shares of Rs. 100 each at a premium of 25%. Mamta, who has 2,000 shares of Asha ltd., failed to pay first and final call totalling Rs.5. Premium was taken by Asha Ltd. at the time of allotment. On forfeiture of Mamta’s shares, the amount to be debited to Share premium account will be (a) Rs.5,000 (b) Rs.10,000 (c) Rs.15,000 (d) Nil? covers all topics & solutions for CA Foundation 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Asha Ltd. issued shares of Rs. 100 each at a premium of 25%. Mamta, who has 2,000 shares of Asha ltd., failed to pay first and final call totalling Rs.5. Premium was taken by Asha Ltd. at the time of allotment. On forfeiture of Mamta’s shares, the amount to be debited to Share premium account will be (a) Rs.5,000 (b) Rs.10,000 (c) Rs.15,000 (d) Nil?.
Solutions for Asha Ltd. issued shares of Rs. 100 each at a premium of 25%. Mamta, who has 2,000 shares of Asha ltd., failed to pay first and final call totalling Rs.5. Premium was taken by Asha Ltd. at the time of allotment. On forfeiture of Mamta’s shares, the amount to be debited to Share premium account will be (a) Rs.5,000 (b) Rs.10,000 (c) Rs.15,000 (d) Nil? in English & in Hindi are available as part of our courses for CA Foundation. Download more important topics, notes, lectures and mock test series for CA Foundation Exam by signing up for free.
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