Accounting for Share Capital
Accounting for Share Capital tests the Companies Act 2013 sequence: application, allotment, calls, forfeiture, reissue and balance-sheet presentation. Questions often combine oversubscription, pro-rata allotment and forfeiture.
Issue and calls
Shares may be issued at par, premium or discount (discount only with conditions). Calls in arrears are deducted from called-up capital; calls in advance are a current liability. On pro-rata allotment, excess application money is adjusted against allotment and later calls; any surplus is refunded. Securities premium is credited only when received and is shown under Reserves and Surplus.
Forfeiture and reissue
Forfeiture cancels the defaulting shareholder's shares. Share Capital is debited with the called-up amount; Share Forfeiture is credited with the amount actually received towards capital; Calls in Arrears is credited. On reissue, any discount cannot exceed the amount forfeited. The net gain is transferred to Capital Reserve. The balance in Share Forfeiture for shares not reissued is shown within Share Capital, not as a free reserve.
Worked example
20,000 shares of ₹10 each issued at ₹2 premium. X holds 2,000 shares and paid application ₹3 and allotment ₹5 (including premium ₹2); calls of ₹4 per share were unpaid. Capital received = ₹6 per share = ₹12,000; calls in arrears = ₹8,000. Forfeiture: Share Capital Dr ₹20,000; To Share Forfeiture ₹12,000; To Calls in Arrears ₹8,000. The ₹4,000 securities premium already received remains. Reissue at ₹7: Bank Dr ₹14,000; Share Forfeiture Dr ₹6,000; To Share Capital ₹20,000. Capital Reserve = ₹12,000 - ₹6,000 = ₹6,000.
Traps
Do not credit securities premium again at forfeiture if it was already received. Do not transfer the whole forfeiture balance to capital reserve if some shares remain forfeited. Use called-up amount, not face value, for forfeiture. Deduct calls in arrears in the balance sheet.