Match each transaction event relating to the forfeiture and re-issue of shares on the left with its correct double-entry accounting treatment on the right.
- Cancellation of share capital upon forfeiture of sharesDebit Share Capital Account with the called-up amount
- Accounting for unpaid calls on forfeited sharesCredit Calls-in-Arrears Account with the unpaid call amount
- Discount allowed to the purchaser upon re-issue of forfeited sharesDebit Forfeited Shares Account with the discount granted
- Transfer of surplus gain remaining on re-issued sharesCredit Capital Reserve Account with the net balance remaining
Answer
Cancellation of share capital upon forfeiture matches Debit Share Capital Account with the called-up amount; Accounting for unpaid calls matches Credit Calls-in-Arrears Account with the unpaid call amount; Discount allowed on re-issue matches Debit Forfeited Shares Account with the discount granted; Transfer of surplus gain matches Credit Capital Reserve Account with the net balance remaining.
Each forfeiture and re-issue stage corresponds directly to standard accounting principles: cancelling capital requires debiting Share Capital by the called-up value, closing defaulted call balances requires crediting Calls-in-Arrears, absorbing discounts on re-issue requires debiting Forfeited Shares Account, and transferring realized profit requires crediting Capital Reserve.
Step-by-Step Solution
Key Concept
Accounting Entries for Forfeiture and Re-issue of Shares