Reissue of Forfeited Shares

Reissue of Forfeited Shares

Reissue of shares is not an issue of shares shares  but selling of the shares that were issued earlier  and were cancelled by the company these shares may be reissued by the company on the terms as it may decide .
Forfeited shares may be reissued by the company at Par , At premium or At Discount However the discount allowed on reissue did not exeeds amount received on Forfeiture of shares .
If Forfeited Shares reissued at Par Accounting Entry Will Passed as :
Bank A/c                                                    Dr.                     [With the amount received on reissue

                  To Share Capital A/c                                    [With the amount credited as paid-up]
In case, the forfeited shares are reissued at discount, accounting entry passed is:

 Bank A/c                                               Dr.               [With the amount received on reissue] 

 Forfeited Shares A/c*                       Dr.               [With the discount allowed on reissue]

                     To Share Capital A/c                          [With the amount credited as paid-up]
(*The amount debited to Forfeited Shares Account is calculated as under: No. of shares reissued x (Paid-up Value – Reissue price per share)
If the forfeited shares are reissued at a price higher than their nominal (face) value, the excess of reissue price over nominal (face) value is credited to Securities Premium Reserve Account. The entry passed is:
Bank A/c                                                          Dr.             [With the amount received on reissue]

            To Share Capital A/c                                        [With the amount credited as paid-up]

             To Securities Premium Reserve A/c         [With the excess amount received on reissue    
                                                                                                                      over credited as paid-up]
Maximum Permissible Discount on Reissue of Forfeited Shares
Maximum discount that can be allowed on reissue of forfeited shares is the amount forfeited on the reissued shares.
Accounting Treatment:
(1) When all Forfeited Shares are Reissued
After reissue of all the forfeited shares, balance Left in Forfeited Account is transferred to the Capital Reserve Account The Entry Passed is –:
Forfeited Shares A/c                            Dr.

                  To Capital Reserve A/c

 (Gain on reissue transferred to Capital Reserve)
When Partly Called-up Shares are Forfeited and Reissued
 If forfeited shares which were partly called up are reissued then the conditions would we as follows ;
if the question is silent about the the shares reissued as fully paid up or Partly paid up the paid value to be taken will be the amount called up to the date of forfeiture.
(ii) When All Forfeited Shares are not Reissued
When Some Of the forfeited shares are reissued , Gain on reissued shares is transferred to Capital Reserve .
FORFEITURE OF SHARES UNDER PRO RATA CATEGORY
When shares that were issued on pro rata basis are forfeited amount in arrears on allotment is to be determined . Following process is followed to determine the Amount in Arrears :
1. Calculate total number of shares applied (if not given ) by the shareholder whose shares are being Forfeited applying the following formula ;
Total Shares Applied under Pro rata Category / Total Shares Allotted under Pro rata Category = No. of Shares Alloted to Shareholder
2. Calculate the total number of shares allotted (if not given) as under:
Total Shares Allotted under Pro rata Category / Total Shares Applied under Pro rata Category = No. of Shares Applied By Shareholder

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