Forfeiture of Shares Issued at a Premium :

Case 1: Where shares to be forfeited were issued at a premium and the premium money remained unpaid:

In this case the credit already given to the ‘Securities Premium A/c’ will be cancelled at the time of forfeiture of the shares by debiting “Securities Premium A/c”.

Share Capital A/c                                                                 Dr.                                                                     (with the amount of called up value of shares
forfeited, i.e., no. of shares forfeited x called up
value per share excluding premium).
Securities Premium A/c                                                    Dr.                                                                      (with the amount of premium money remaining unpaid on shares                                                                                                                                                                             forfeited.)
To Shares Forfeited A/c                                                                                         (with the amount already paid by the shareholders on the                                                                                                                                                                                               shares forfeited.)

To Calls-in-Arrear A/c                                                                                            (with the amount unpaid on calls.)

OR

Share Capital A/c                                                              Dr.                                                                        (with the amount of called up value of shares
forfeited, i.e., no. of shares forfeited x called up
value per share excluding premium.)
Securities Premium A/c                                                  Dr.                                                                        (with the amount of premium money remaining
unpaid on shares forfeited.)
To Shares Forfeited A/c                                                                                          (with the amount already paid by the
shareholders on the shares forfeited.)
To Share Allotment A/c                                                                                           (with the amount failed on allotment, if any.)
To Share First Call A/c                                                                                             (with the amount failed on first call, if any.)
To Share Final Call A/c                                                                                            (with the amount failed on final call, if any.)

Case 2: Where shares to be forfeited were issued at a premium and the premium money was duly received on the shares to be forfeited:

In this case Securities Premium Account is already credited at the time of making call will not be cancelled at the time of forfeiture of the shares. In such a case, the accounting entry on forfeiture will be the same as the one passed in case of shares issued at par.