AccountancyCBSE Class 12 · Accounting for Share Capital

Reissue of Forfeited Shares Class 12: Discount Limit, Capital Reserve and Entries

Updated 15 October 2026 · Fact-checked

Forfeited shares can be reissued at par, at a premium or at a discount. The discount cannot exceed the amount forfeited on those shares and is debited to Share Forfeiture. After reissue, the remaining forfeited amount on the reissued shares is a capital profit, transferred from Share Forfeiture to Capital Reserve; the balance on shares not reissued stays.

Discount on reissue is taken from the forfeited amount; whatever is left of it (₹6 − ₹2 = ₹4) moves to Capital Reserve.

Illustration drawn for QuestionBuddy.

Understand Reissue of Forfeited Shares

Meaning. Forfeited shares become the company's own shares. The directors may reissue them to any person, usually as fully paid, at any price, provided the discount allowed does not exceed the amount forfeited on those shares. The buyer is not liable for the old defaulter's arrears.

Reissue entry.

Bank A/c Dr (amount received)
Share Forfeiture A/c Dr (discount on reissue)
To Share Capital A/c (paid-up value credited on reissue, e.g. ₹10 if reissued as fully paid)
To Securities Premium A/c (if reissued above the paid-up value)

Maximum discount. Discount per share ≤ amount forfeited per share. So the minimum reissue price for a fully paid share = paid-up value credited − forfeited amount per share.

Transfer to Capital Reserve. For the shares reissued:

Capital profit = amount forfeited on those shares − discount allowed on reissue (premium on reissue goes to Securities Premium, not here).
Entry: Share Forfeiture A/c Dr; To Capital Reserve A/c.
If only some forfeited shares are reissued, transfer only the profit on the reissued ones; the forfeited amount on the rest stays in Share Forfeiture (shown under Share Capital).

Shares forfeited from different holders at different stages. Find the forfeited amount per share for each group, then apply it to the shares reissued from each group.

Originally at premium. If the forfeited shares were issued at a premium, the premium question is settled at forfeiture; on reissue, any amount received above the paid-up value is credited to Securities Premium afresh.

Presentation. Capital Reserve is shown under Reserves and Surplus. The remaining Share Forfeiture balance is added to Share Capital in the notes.

Reissue of Forfeited Shares: key facts

Discount on reissue: Paid-up value credited − reissue price (per share); Debited to Share Forfeiture.
Maximum discount: Amount forfeited per share; So minimum price = paid-up value − forfeited amount.
Capital Reserve: Forfeited amount on reissued shares − discount on their reissue; Only the reissued shares.
Balance left in Share Forfeiture: Forfeited amount on shares not yet reissued; A built-in check.

How to answer Reissue of Forfeited Shares questions

Reissue sums go wrong when students transfer the whole Share Forfeiture balance. Work only with the shares actually reissued.

1Find the forfeited amount per share (from the forfeiture entry).
2Note how many shares are reissued, at what price and as how much paid up.
3Discount = paid-up value − price; check it does not exceed the forfeited amount per share.
4Pass the reissue entry (Bank, Share Forfeiture for the discount, Share Capital, and Securities Premium if any).
5Capital Reserve = forfeited amount on reissued shares − discount; pass the transfer.
6Check: the balance left in Share Forfeiture equals the forfeited amount on unissued shares.

Reissue of Forfeited Shares in real life

The idea, met in an everyday situation. Answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

Reissue at a discount still leaves a gain

Suppose Greenfield Agro Ltd (a fictional company) forfeited 100 shares of ₹10 each after the holder had paid ₹6 per share. A new investor offers ₹8 per share for them as fully paid shares.

Is the company allowed to accept, and does it gain anything overall?

Try it first, then show the solutionSolution

Discount = 10 − 8 = ₹2 per share, within the ₹6 forfeited: allowed.
Reissue: Bank Dr 800; Share Forfeiture Dr 200; To Share Capital 1,000.
Capital Reserve = 100 × 6 − 200 = ₹400.

Answer: Yes. The company receives ₹14 per share in all (₹6 from the defaulter and ₹8 from the new buyer) for shares credited at ₹10. The extra ₹4 per share, ₹400 in total, is a capital profit transferred to Capital Reserve.

Memory hook: Old money + new money − face value = capital reserve.

Tricks to remember Reissue of Forfeited Shares

Short memory aids. Say each one aloud once, then use it on a question the same day.

Discount ≤ Forfeited
You can give away only what the defaulter left behind.
Use it when: Maximum discount and minimum price.
Only the reissued go to reserve
Capital Reserve is computed on reissued shares only.
Use it when: Partial reissue.
Above face = Securities Premium
Any amount above the paid-up value on reissue is premium, not capital reserve.
Use it when: Reissue at premium.

Reissue of Forfeited Shares: solved examples

Ordered from board level to HOTS. Try each one before you open the solution.

Example 1: Capital reserve after reissue · 1 mark · MCQBoard level

100 shares of ₹10 each, on which ₹4 per share had been paid, were forfeited. They were reissued at ₹8 per share as fully paid. The amount transferred to Capital Reserve is:
(a) ₹400
(b) ₹200
(c) ₹800
(d) nil

Try it first, then show the solutionSolution

Forfeited: 100 × 4 = 400; discount: 100 × 2 = 200.
Capital Reserve = 400 − 200 = ₹200.

Answer: (b) ₹200

Example 2: Partial reissue · 3 marks · Short answerBoard level

A company forfeited 300 shares of ₹10 each, fully called, on which ₹6 per share had been paid. Of these, 200 shares were reissued at ₹9 per share as fully paid. Pass the entries for reissue and transfer to Capital Reserve, and find the balance left in Share Forfeiture. (3 marks)

Try it first, then show the solutionSolution

Bank A/c Dr 1,800; Share Forfeiture A/c Dr 200; To Share Capital A/c 2,000.
Forfeited on 200 shares = 1,200; Capital Reserve = 1,200 − 200 = 1,000: Share Forfeiture A/c Dr 1,000 To Capital Reserve A/c 1,000.
Balance = 1,800 − 200 − 1,000 = ₹600 (= 100 × 6).

Answer: Capital Reserve ₹1,000; Share Forfeiture balance ₹600 on the 100 shares not reissued.

Example 3: Reissue above face value · 3 marks · Short answerHarder board level

500 shares of ₹10 each issued at a premium of ₹2 were forfeited after the holder paid only the application money of ₹3 (the premium was unpaid). 400 of these shares were reissued at ₹11 per share as fully paid. Pass the reissue and Capital Reserve entries. (3 marks)

Try it first, then show the solutionSolution

Forfeited per share = ₹3 (premium was unpaid, so it was cancelled at forfeiture).
Reissue: Bank A/c Dr 4,400; To Share Capital A/c 4,000; To Securities Premium A/c 400.
No discount; Capital Reserve = 400 × 3 = 1,200: Share Forfeiture A/c Dr 1,200 To Capital Reserve A/c 1,200.

Answer: Securities Premium ₹400 on reissue; Capital Reserve ₹1,200; ₹300 stays in Share Forfeiture for 100 shares.

Example 4: Minimum price and the reserve · 3 marks · Short answerHarder board level

200 shares of ₹10 each, ₹8 called up, were forfeited after the holder paid ₹5 per share. (i) What is the minimum price at which they can be reissued as fully paid? (ii) If reissued at ₹6 per share as fully paid, calculate the Capital Reserve. (3 marks)

Try it first, then show the solutionSolution

(i) Forfeited per share = ₹5, so maximum discount = ₹5; minimum price = 10 − 5 = ₹5.
(ii) Discount = 10 − 6 = ₹4 per share = 800.
Capital Reserve = 200 × 5 − 800 = ₹200.

Answer: (i) ₹5 per share. (ii) Capital Reserve ₹200.

Example 5: Two defaulters, one reissue · 6 marks · Long answerHOTS / competency

Shares of ₹10 each were issued at a premium of ₹3: application ₹3, allotment ₹5 (including premium), call ₹5. A, holding 400 shares, paid only the application money; B, holding 200 shares, paid application and allotment but not the call. All 600 shares were forfeited after the call. Then 300 shares (all of B's and 100 of A's) were reissued at ₹8 per share as fully paid. Pass the forfeiture, reissue and Capital Reserve entries, and find the balance in Share Forfeiture. (6 marks)

Try it first, then show the solutionSolution

A's shares: Share Capital Dr 4,000; Securities Premium Dr 1,200; To Share Forfeiture 1,200; To Share Allotment 2,000; To Share Call 2,000.
B's shares: Share Capital Dr 2,000; To Share Forfeiture 1,000 (₹5 capital paid; premium received); To Share Call 1,000.
Reissue: Bank Dr 2,400; Share Forfeiture Dr 600; To Share Capital 3,000.
Forfeited on reissued shares = B 1,000 + A's 100 × 3 = 1,300; Capital Reserve = 1,300 − 600 = ₹700.
Balance = 2,200 − 600 − 700 = ₹900 (= 300 of A's shares × 3).

Answer: Capital Reserve ₹700; Share Forfeiture balance ₹900 on 300 unissued shares.

Example 6: Limit on discount · 1 mark · Assertion-reasonHOTS / competency

Assertion (A): The discount on reissue of forfeited shares cannot exceed the amount forfeited on those shares.
Reason (R): Otherwise the total amount received on the shares would fall below their paid-up value.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is true, but R is false.
(d) A is false, but R is true.

Try it first, then show the solutionSolution

Old money + new money must at least equal the paid-up value credited; a larger discount would mean issuing shares at an effective discount. R explains A.

Answer: (a) Both A and R are true, and R is the correct explanation of A.

Where students lose marks in Reissue of Forfeited Shares

The slips examiners see most often, and what to write instead.

Mistake: Transferring the whole Share Forfeiture balance to Capital Reserve
Forgetting that only some shares were reissued.
Wrong working
Share Forfeiture Dr 1,600 To Capital Reserve 1,600.
Right working
Only 1,000 (on the 200 reissued shares) is transferred.
Do this: Compute per reissued share.
Usually costs: 1-2 marks.
Mistake: Crediting reissue premium to Capital Reserve
Thinking all gains go to the reserve.
Wrong working
Capital Reserve includes the ₹1 per share above face value.
Right working
Amount above face value goes to Securities Premium.
Do this: Capital Reserve comes only from Share Forfeiture.
Usually costs: 1 mark.
Mistake: Allowing a discount larger than the forfeited amount
Not checking the limit.
Wrong working
Reissued at ₹4 when only ₹5 was forfeited on a ₹10 share.
Right working
Minimum price ₹5.
Do this: Discount ≤ forfeited amount per share.
Usually costs: Entry marked wrong.
Mistake: Mixing forfeited amounts of different holders
Using an average.
Wrong working
Forfeited per share = 2,200 ÷ 600.
Right working
Use ₹3 for A's shares and ₹5 for B's shares separately.
Do this: Track each group.
Usually costs: 2 marks.

Exam tips

Always state the Capital Reserve working: 'forfeited on reissued shares − discount'.
Show the Share Forfeiture Account in T-form for longer questions; its balance proves your answer.
Pass two separate entries: the reissue and the transfer to Capital Reserve.
Reissue is the most repeated share capital item: 1-mark MCQs and 4- or 6-mark forfeiture-reissue questions.

Practice questions on Reissue of Forfeited Shares

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

Q1 · 1 mark · MCQBoard level
On reissue of forfeited shares, Capital Reserve is created from:
(a) the premium received on reissue
(b) the surplus of forfeited amount over discount on the reissued shares
(c) the whole balance in Share Forfeiture Account
(d) the discount allowed on reissue
Hint
Reissued shares only.
Answer
(b) the surplus of forfeited amount over discount on the reissued shares
Q2 · 1 mark · MCQBoard level
The maximum discount at which forfeited shares can be reissued is:
(a) 10% of face value
(b) the amount unpaid on those shares
(c) the amount forfeited on those shares
(d) any amount the directors decide
Hint
What the defaulter left behind.
Answer
(c) the amount forfeited on those shares
Q3 · 3 marks · Short answerBoard level
50 shares of ₹10 each, on which ₹7 per share had been paid, were forfeited and reissued at ₹10 per share fully paid. Pass the entries. (3 marks)
Hint
No discount.
Answer
Bank A/c Dr 500 To Share Capital A/c 500. Share Forfeiture A/c Dr 350 To Capital Reserve A/c 350.
Q4 · 3 marks · Short answerHarder board level
100 shares of ₹10 each (issued at par), on which ₹4 per share had been paid, were forfeited and reissued at ₹12 per share as fully paid. Pass the entries. (3 marks)
Hint
Above face value.
Answer
Bank A/c Dr 1,200; To Share Capital A/c 1,000; To Securities Premium A/c 200. Share Forfeiture A/c Dr 400 To Capital Reserve A/c 400.
Q5 · 3 marks · Short answerHarder board level
500 shares of ₹10 each, fully called, on which ₹6 per share had been paid, were forfeited. 300 of them were reissued at ₹7 per share fully paid. Calculate the Capital Reserve and the balance left in Share Forfeiture. (3 marks)
Hint
Discount ₹3 per share.
Answer
Forfeited on 300 = 1,800; discount = 900; Capital Reserve = ₹900. Balance = 3,000 − 900 − 900 = ₹1,200 (= 200 × 6).
Q6 · 3 marks · Short answerHarder board level
100 forfeited shares of ₹10 each (₹8 called up, ₹5 paid) were reissued as ₹8 paid up for ₹6 per share. Pass the entries. (3 marks)
Hint
Paid-up value credited is ₹8.
Answer
Bank A/c Dr 600; Share Forfeiture A/c Dr 200; To Share Capital A/c 800. Share Forfeiture A/c Dr 300 To Capital Reserve A/c 300.
Q7 · 3 marks · Short answerHarder board level
In a pro-rata case, 200 shares of ₹10 each were forfeited with ₹900 credited to Share Forfeiture. They were reissued at ₹8 per share as fully paid. Pass the reissue and Capital Reserve entries. (3 marks)
Hint
Use the total forfeited amount.
Answer
Bank A/c Dr 1,600; Share Forfeiture A/c Dr 400; To Share Capital A/c 2,000. Share Forfeiture A/c Dr 500 To Capital Reserve A/c 500.
Q8 · 1 mark · Assertion-reasonHarder board level
Assertion (A): After a partial reissue, the whole balance in Share Forfeiture Account is transferred to Capital Reserve.
Reason (R): The forfeited amount on shares not yet reissued remains in Share Forfeiture Account.
(a) Both A and R are true, and R is the correct explanation of A.
(b) Both A and R are true, but R is not the correct explanation of A.
(c) A is true, but R is false.
(d) A is false, but R is true.
Hint
Which shares count?
Answer
(d) A is false, but R is true.
Q9 · 3 marks · Short answerHOTS / competency
200 shares of ₹10 each, on which ₹6 per share had been paid, were forfeited and reissued as fully paid. ₹600 was transferred to Capital Reserve. At what price per share were they reissued? (3 marks)
Hint
Discount = forfeited − reserve.
Answer
Forfeited = 1,200; discount = 1,200 − 600 = 600 = ₹3 per share; reissue price = 10 − 3 = ₹7.
Q10 · 3 marks · Short answerHOTS / competency
Shares of ₹10 each were issued at a premium of ₹2. A holder paid only the application money of ₹3 (the premium was due on allotment) and his shares were forfeited. What is the minimum price at which they can be reissued as fully paid, and why is the premium not part of the calculation? (3 marks)
Hint
What was forfeited per share?
Answer
Forfeited per share = ₹3 (capital only), so the minimum price = 10 − 3 = ₹7. The unpaid premium was cancelled at forfeiture by debiting Securities Premium; it never reached Share Forfeiture, so it cannot support a discount.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

1.Entry to transfer the gain on reissued shares?Show answer
Share Forfeiture A/c Dr To Capital Reserve A/c.
2.Forfeited ₹4 per share; minimum price for a fully paid ₹10 share?Show answer
₹6.
3.Where is Capital Reserve shown in the balance sheet?Show answer
Under Reserves and Surplus.
4.Reissue price above face value: which account is credited for the excess?Show answer
Securities Premium.
5.What does the remaining Share Forfeiture balance represent?Show answer
The forfeited amount on shares not yet reissued.

Reissue of Forfeited Shares: frequently asked questions

What is reissue of forfeited shares in Class 12?

The sale of shares that the company forfeited, to new buyers, at par, premium or a discount not exceeding the amount forfeited on them.

Why is the surplus transferred to Capital Reserve?

It is a capital profit, the extra money received on shares beyond their paid-up value, so it is not available for dividend and is kept as Capital Reserve.

Can forfeited shares be reissued as partly paid?

Yes; credit Share Capital with the paid-up value stated, and the discount rule applies to that value.

What if shares from two holders were forfeited at different stages?

Use each holder's forfeited amount per share for the shares reissued from that group; never average.