FORFEITURE OF SHARES
Forfeiture of shares means cancelling the shares. Shares are cancelled for non-payment of calls due. However, shares can be forfeited only if the  Articles of Association Allows forfeiture .
Accounting Entries on Forfeiture of Shares
Forfeited shares may have been issued at par or at premium. Accounting entry for forfeiture will vary according to situation .
(a) Forfeiture of Shares which were Issued at Par-:
The entry for forfeiture of shares is:
Share Capital A/c                         Dr.   [Number of Shares Forfeited x Called-up Value per share]

                           To Forfeited Shares A/c                           [With amount received on forfeited shares]

                            To Shares Allotment A/c                      [With the amount due but not paid on allotment]

                             To Shares Call/Calls A/c                     [With the amount due but not paid on call]

* If “Calls-in-Arrears Account” is maintained, “Calls-in- Arrears Account” is credited in place of “Shares Allotment A/c” and “Shares Call/Calls A/c”.
* On forfeiture. Share Capital Account is debited with the called-up amount up to the date of forfeiture and not by the nominal (face) value of shares.
Forfeiture of Shares which were Originally Issued at Premium
When shares issued at premium are forfeited, two following possibilities exist :
(i) Securities Premium amount has been received; and
(ii) Securities Premium amount has not been received .
(i) When Securities Premium Amount has been Received
The amount received as securities Premium on shares forfeited is not cancelled . Securities Premium Reserve Account is not debited when the Shares are forfeited . Securities Premium Reserve is not debited Because Securities Premium Credited to Securities Premium Reserve Account .
(ii) When Securities Premium Amount has not been Received
The amount of the premium credited to the Securities Premium Reserve Account but not received on forfeited shares is debited to the account. The Provisions of Section 52(2) of theCompanies Act, 2013 is not violated since the amount although credited is not received.
Accounting Entries for Forfeiture of Shares Issued at a Premium
(a) When Calls-in-Arrears Account is not maintained:
(i) If Securities Premium is received:
Share Capital A/c                                     Dr.                             [Amount called-up less premium]

                   To Shares Allotment A/c                                        [Amount not received on allotment]

                   To Shares Call/Calls A/c                                         [Amount not received on calls]

                   To Forfeited Shares A/c                                          [Amount received less premium]
(ii) If Securities Premium is not received:

 Share Capital A/c                                                        Dr. [Amount called-up less premium]

 Securities Premium Reserve A/c                            Dr. [Premium amount called-up but not received]

                   To Shares Allotment A/c                                          [Amount not received on allotment]

                    To Shares Call/Calls A/c                                  [ Amount not received on calls]
                    To Forfeited Shares A/c                                    [Amount received less premium]
(b) When Calls-in-Arrears Account is maintained:
(i)_If Securities Premium is received:

 Share Capital A/c                                               Dr.                   [Amount called-up as Share Capital]

               To Calls-in-Arrears A/c                                              [Amount not received on calls]

               To Forfeited Shares A/c                                            [Amount received less premium]
(ii) If Securities Premium is not received;

 Share Capital A/c                                                   Dr.         [Amount called-up as Share Capital]

 Securities Premium Reserve A/c                       Dr.         [Amount not received as premium]

                         To Calls-in-Arrears A/c                               [Amount not received on calls]

                         To Forfeited Shares A/c                                  [Amount received less premium]