Question

Lexa Ltd. issued 50,000 equity shares of ₹ 10 each at a premium of ₹ 2 per share. The amount was payable as follows: On application and allotment – ₹ 7 per share (including premium). On first and final call – Balance. The issue was fully subscribed. All the money was duly received except the first and final call on 1,000 equity shares. These shares were forfeited. On forfeiture of these shares, Calls in Arrears Account will be:

• A. credited by ₹ 7,000
• B. debited by ₹ 5,000
• C. credited by ₹ 5,000
• D. debited by ₹ 7,000

Hint:

When shares are forfeited, record the unpaid amount in the Calls in Arrears account, which is credited by the unpaid portion of the calls.

Answer 1

The Correct Option is C

The outstanding amount for the first and final call on these shares is ₹ 5 per share, calculated as ₹ 7 per share (first and final call) less ₹ 2 already paid as premium. The Calls in Arrears are calculated as 1,000 shares × ₹ 5/share, totaling ₹ 5,000. Consequently, the Calls in Arrears Account will be credited with ₹ 5,000.