RE-ISSUE OF FORFEITED SHARES

The Board of Directors can sell/ reissue or dispose of forfeited shares on such terms as it thinks fit. However, the amount receivable on re-issue of such shares together with the amount already received from the defaulting member, shall not, in any case, be less than the face value of the shares. Forfeited shares may be re-issued at par, at a premium or even at a discount.

RE-ISSUE OF FORFEITED SHARES – AT PAR : the forfeited shares can be re-issued at par. In such a case, the entire amount standing to the credit of Shares Forfeited Account for those shares would be treated as net gain and transferred to Capital Reserve Account.

Journal entries

1. On re-issue of shares:

Bank                                                                                         Dr. with the amount received on reissue i.e. no. o To Share                                                                                                                shares re-issued x amount received per share.

Capital A/c

2. On transfer of Shares Forfeited Account to Capital Reserve Account:

Shares Forfeited A/c                                                            Dr. with the forfeited amount on shares re-issued.

To Capital Reserve A/c

RE-ISSUE OF FORFEITED SHARES – AT A PREMIUM : If forfeited shares are re-issued at a premium, the amount of such premium should be credited to Securities Premium Account. In such a case also, the entire amount standing to the credit of Shares Forfeited Account would be treated as net gain and transferred to Capital Reserve Account.

Journal entries

1. On re-issue of shares:

Bank                                                                                              Dr. with the total amount received on re-issue.

              To Share Capital A/c                                                            with nominal value or paid-up value of shares.

              To Securities Premium A/c                                                 with the premium amount received.

2. On transfer of Shares Forfeited A/c to Capital Reserve A/c:

Shares Forfeited A/c                                                                 Dr. with the forfeited amount on shares re-issued

                 To Capital Reserve A/c

Important Note: In case only a part of the forfeited shares are re-issued, only the proportionate amount representing the net gain on the shares re-issued should be transferred to Capital Reserve Account and the balance representing the amount received on forfeited shares not yet re-issued should be left in the Shares Forfeited Account itself. This amount should be shown as addition to the paid up capital on the liabilities side of the balance sheet.