Question

On forfeiture of 500 shares for non-payment of call money, what amount will be credited to Shares Forfeiture Account?

• A. Rs. 2,500
• B. Rs. 3,500
• C. Rs. 4,500
• D. Rs. 1,500

Hint:

On forfeiture, the amount already received on those shares is transferred to Share Forfeiture A/c. The unpaid amount is simply cancelled (not transferred).

Answer 1

The Correct Option is A

Step 1: Compute total application funds gathered for forfeited shares.
Application funds = Rs. 5 per share (inclusive of premium).
For 500 shares = \( 500 \times 5 = Rs. 2,500 \).

Step 2: Handling of premium.
The premium component of application funds is not transferred to forfeiture; only the principal capital amount is considered. However, in this scenario, the application funds (including premium) were fully collected and credited. Consequently, the amount forfeited is equivalent to the actual amount received on those shares.

Step 3: Default on call and forfeiture.
As the shareholder failed to pay at the call stage, the funds already remitted (application + allotment) remain with the company and are credited to the Share Forfeiture Account. However, in this specific case, the problem indicates that only application funds were paid, with the call remaining unpaid. Therefore, the forfeiture amount is Rs. 2,500.

Final Answer: \[\boxed{Rs. 2,500}\]