MCQ forfeited share /discount on re-issue of share

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Forfeiture of Shares issued :

Share Capital A/c..........(Called up amount) Dr.
To Share Forfeiture A/c...........(Paid up amount)
To Share Allotment A/c
To Share Calls A/c (individually)
(..... shares forfeited for non-payment of allotment money and calls made)



Forfeiture of shares is when a company cancels a shareholder's shares because they didn't pay the required subscription money. This can happen when a shareholder doesn't pay the call money or breaks other ownership terms.
How it happens
• The company issues shares to shareholders, either in full or in installments.
• If a shareholder doesn't pay the call money, the company can cancel the shares.
• The company keeps any money the shareholder paid.
• The company can reissue or cancel the forfeited shares.
What it means for the shareholder
• The shareholder loses the amount they paid for the shares.
• The shareholder loses their interest in the shares.
• The shareholder no longer owes any remaining balance.
• The shareholder gives up any potential capital gain on the shares.
What it means for the company
• The company's subscribed capital decreases.
• The company's financial ratios, such as return on equity (ROE) and earnings per share (EPS), are affected.
• The company's equity structure is affected.
• The company has to comply with tax regulations regarding the forfeiture of shares.