AccountsISC Class 12 · Issue of Shares

Forfeiture and Reissue of Shares: ISC Class 12 Accounts

Updated 16 October 2026 · Fact-checked

Forfeiture cancels shares when a call is unpaid. Share Capital is debited with the amount called up, Securities Premium with any premium not received, Calls in Arrears is credited with the unpaid amount and Shares Forfeited with the amount received. Forfeited shares may be reissued at a discount up to the forfeited amount; the gain goes to Capital Reserve.

Money received goes to Shares Forfeited; on reissue the discount is charged to it, and whatever gain remains moves to Capital Reserve.

Illustration drawn for QuestionBuddy.

Understand Forfeiture and Reissue of Shares

Why forfeit? If a shareholder does not pay allotment or call money after notice, the directors may forfeit his shares as the Articles allow. He loses the shares and the money already paid.

ISC method: Calls in Arrears. The CISCE syllabus requires unpaid allotment or call money to be transferred to a Calls in Arrears account. The forfeiture entry is:

Share Capital A/c Dr (number of shares × amount called up, excluding premium)
Securities Premium A/c Dr (only if the premium was not received)
To Calls in Arrears A/c (all unpaid amounts, including unpaid premium)
To Shares Forfeited A/c (capital money actually received).

If the premium was received, it stays in Securities Premium; it is never cancelled.

Pro-rata cases. Excess application money of a pro-rata applicant is first adjusted against allotment. Work out what he actually paid; that capital money is the forfeited amount. ISC examiners in 2025 noted candidates unable to find the calls-in-arrears figure, and so getting the forfeiture entry wrong.

Reissue. Forfeited shares belong to the company and may be reissued at par, premium or discount.

Bank A/c Dr (amount received); Shares Forfeited A/c Dr (discount); To Share Capital A/c (paid-up value credited); To Securities Premium A/c (if reissued above par).
Maximum discount per share = amount forfeited per share. So there can never be a net loss on reissue.

Capital Reserve. After reissue, the forfeited amount on the reissued shares, minus the discount allowed on them, is a capital gain: Shares Forfeited A/c Dr; To Capital Reserve A/c. The forfeited amount on shares not yet reissued stays in Shares Forfeited.

Disclosure. The balance of Shares Forfeited is shown as a separate item under Share Capital in the Notes to Accounts. Forfeited shares not reissued are not part of subscribed capital.

Forfeiture and Reissue of Shares: key facts

Forfeiture entry: Share Capital Dr (called up) + Securities Premium Dr (if unpaid) = Calls in Arrears Cr (unpaid) + Shares Forfeited Cr (received); Both sides must agree.
Maximum discount on reissue: Maximum discount per share = Amount forfeited per share; Minimum reissue price = Paid-up value credited − Forfeited amount per share.
Capital Reserve on reissue: Forfeited amount on reissued shares − Discount on reissue; Only for the shares reissued.
Balance in Shares Forfeited: Forfeited amount per share × Shares not yet reissued; Shown under Share Capital.
Pro-rata forfeited amount: Application money paid on shares applied for (adjusted towards allotment) + any other capital paid; Premium received is not part of the forfeited amount.

How to answer Forfeiture and Reissue of Shares questions

Forfeiture and reissue sit inside almost every ISC 10-mark share question. A small table per share keeps it error-free.

1Draw a per-share table: called up, paid (capital), paid (premium), unpaid.
2For pro-rata applicants, adjust the excess application against allotment first.
3Pass the forfeiture entry: debit capital called up and unpaid premium; credit Calls in Arrears and Shares Forfeited.
4For reissue, credit Share Capital with the paid-up value; debit Shares Forfeited with the discount.
5Transfer the gain on reissued shares to Capital Reserve.
6Carry the forfeited amount on unissued shares in Shares Forfeited and show it under Share Capital.

Forfeiture and Reissue of 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.

Forfeit and resell

Suppose a coaching institute sells a ₹12,000 seat payable in parts. A student pays ₹6,000 and then stops paying despite reminders. The institute cancels the seat, keeps the ₹6,000 and sells the seat to someone else for ₹11,000.

How much does the institute gain overall from the cancelled seat?

Try it first, then show the solutionSolution

Money kept from the first student: ₹6,000 (like the forfeited amount).
Discount given to the new student: 12,000 − 11,000 = ₹1,000.
Net gain = 6,000 − 1,000 = ₹5,000 (like a transfer to Capital Reserve).

Answer: The institute gains ₹5,000.

Memory hook: Keep what was paid, give at most that much off.

Tricks to remember Forfeiture and Reissue of Shares

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

Called up out, received in Forfeited
Debit Share Capital with what was called up; credit Shares Forfeited with what was received.
Use it when: Writing the forfeiture entry fast.
Premium paid stays
Debit Securities Premium only if the premium was not received.
Use it when: Shares issued at a premium.
No loss on reissue
Discount can never exceed the forfeited amount; whatever is left goes to Capital Reserve.
Use it when: Maximum discount and minimum price questions.

Forfeiture and Reissue of Shares: solved examples

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

Example 1: Maximum discount on reissue · 1 mark · MCQBoard level

The maximum discount at which forfeited shares can be reissued is:
(a) 10% of face value
(b) the amount forfeited on those shares
(c) the unpaid amount on those shares
(d) any amount the directors decide

Try it first, then show the solutionSolution

The discount is met from the Shares Forfeited balance.
It cannot exceed that balance on the reissued shares.

Answer: (b) the amount forfeited on those shares

Example 2: Forfeiture when the first call is unpaid · 3 marks · Short answerBoard level

Orchid Ltd forfeited 600 equity shares of ₹10 each, ₹8 called up, for non-payment of the first call of ₹3; ₹5 per share had been received. Pass the forfeiture entry. (3 marks)

Try it first, then show the solutionSolution

Share Capital Dr 600 × 8 = ₹4,800.
Calls in Arrears Cr 600 × 3 = ₹1,800; Shares Forfeited Cr 600 × 5 = ₹3,000.

Answer: Share Capital A/c Dr 4,800; To Calls in Arrears A/c 1,800; To Shares Forfeited A/c 3,000.

Example 3: Reissue as fully paid and capital reserve · 3 marks · Short answerHarder board level

The 600 shares forfeited by Orchid Ltd (₹5 per share forfeited) are reissued as fully paid at ₹7 per share. Pass the reissue entry and the transfer to Capital Reserve. (3 marks)

Try it first, then show the solutionSolution

Bank Dr 4,200; Shares Forfeited Dr 1,800 (discount ₹3 each); To Share Capital 6,000.
Capital Reserve = 3,000 − 1,800 = ₹1,200: Shares Forfeited Dr 1,200; To Capital Reserve 1,200.

Answer: Reissue: Bank ₹4,200 and Shares Forfeited ₹1,800 Dr; Share Capital ₹6,000 Cr. Capital Reserve ₹1,200.

Example 4: Forfeiture with premium unpaid, then partial reissue · 6 marks · Long answerHarder board level

Sapphire Ltd issued shares of ₹10 at a premium of ₹3: ₹2 on application, ₹6 on allotment (including premium) and ₹5 on first and final call. A holder of 1,200 shares paid only the application money; his shares were forfeited after the call. 900 of them were reissued at ₹9 fully paid. Pass the forfeiture and reissue entries, the Capital Reserve transfer and the balance left in Shares Forfeited. (6 marks)

Try it first, then show the solutionSolution

Forfeiture: Share Capital Dr 12,000; Securities Premium Dr 3,600 (not received); To Calls in Arrears 13,200 (allotment 7,200 + call 6,000); To Shares Forfeited 2,400 (₹2 each).
Reissue: Bank Dr 8,100; Shares Forfeited Dr 900; To Share Capital 9,000.
Capital Reserve = 900 × 2 − 900 = ₹900.
Balance in Shares Forfeited = 300 × 2 = ₹600.

Answer: Forfeited ₹2,400; Capital Reserve ₹900; Shares Forfeited balance ₹600 on 300 shares.

Example 5: Forfeiture after pro-rata allotment · 6 marks · Long answerHOTS / competency

Jasmine Ltd issued shares of ₹10 at par: ₹3 on application, ₹4 on allotment and ₹3 on call. Pro-rata allotment was made. Ravi applied for 900 shares and was allotted 600; he paid nothing after application. His shares were forfeited after the call and all reissued at ₹7 fully paid. Pass the forfeiture entry and find the Capital Reserve. (6 marks)

Try it first, then show the solutionSolution

Application paid = 900 × 3 = 2,700; excess 300 × 3 = 900 adjusted against allotment.
Allotment due 600 × 4 = 2,400; unpaid 1,500. Call unpaid 600 × 3 = 1,800. Calls in Arrears = ₹3,300.
Forfeiture: Share Capital Dr 6,000; To Calls in Arrears 3,300; To Shares Forfeited 2,700.
Reissue discount = 600 × 3 = 1,800; Capital Reserve = 2,700 − 1,800 = ₹900.

Answer: Share Capital ₹6,000 Dr; Calls in Arrears ₹3,300 and Shares Forfeited ₹2,700 Cr; Capital Reserve ₹900.

Example 6: Minimum reissue price · 3 marks · Short answerHOTS / competency

400 shares of ₹10 each, ₹9 called up, were forfeited after ₹6 per share had been paid. They are to be reissued as fully paid. What is the minimum total amount the company must receive? (3 marks)

Try it first, then show the solutionSolution

Forfeited amount = ₹6 per share = maximum discount.
Minimum price = 10 − 6 = ₹4 per share.
Minimum total = 400 × 4 = ₹1,600.

Answer: Minimum amount = ₹1,600 (₹4 per share).

Where students lose marks in Forfeiture and Reissue of Shares

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

Mistake: Debiting premium already received
Cancelling the premium in every forfeiture.
Wrong working
Securities Premium Dr (premium was paid)
Right working
No premium debit when it was received
Do this: Debit premium only if it is in Calls in Arrears.
Usually costs: 1 mark.
Mistake: Not splitting Calls in Arrears between capital and premium
Treating all arrears as capital.
Wrong working
Share Capital Dr 15,600
Right working
Share Capital Dr 12,000; Securities Premium Dr 3,600
Do this: ISC examiners in 2025 asked students to split unpaid capital and unpaid premium.
Usually costs: 1-2 marks.
Mistake: Quoting maximum discount when the minimum price is asked
Reading the question too fast.
Wrong working
Answer ₹6 per share
Right working
Minimum price ₹4 per share
Do this: ISC examiners in 2024 reported this confusion; underline what is asked.
Usually costs: 1 mark.
Mistake: Transferring the whole forfeited balance to Capital Reserve
Ignoring shares not yet reissued.
Wrong working
Capital Reserve 2,400 − 900 = 1,500
Right working
Capital Reserve 1,800 − 900 = 900
Do this: Only the reissued shares' forfeited amount is transferred.
Usually costs: 1 mark.

Exam tips

Write complete entries with narrations; ISC examiners in 2024 asked students not to write expressions such as '5 × 1,000' in place of amounts.
Show a per-share working table for pro-rata forfeiture.
Show Shares Forfeited balance under Share Capital in the Notes to Accounts.
State 'net gain on reissue' explicitly before the Capital Reserve entry.

Practice questions on Forfeiture and Reissue of 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
The balance of Shares Forfeited A/c after part reissue is shown in the Balance Sheet under:
(a) Reserves and Surplus
(b) Share Capital (Notes to Accounts)
(c) Other Current Liabilities
(d) Capital Reserve
Hint
CISCE disclosure rule.
Answer
(b) Share Capital (Notes to Accounts)
Q2 · 1 mark · MCQBoard level
The gain on reissue of forfeited shares is transferred to:
(a) Securities Premium
(b) General Reserve
(c) Capital Reserve
(d) Statement of Profit and Loss
Hint
It is a capital profit.
Answer
(c) Capital Reserve
Q3 · 3 marks · Short answerBoard level
250 shares of ₹10 each, fully called up, were forfeited after ₹7 per share had been paid. Pass the forfeiture entry. (3 marks)
Hint
Arrears ₹3 per share.
Answer
Share Capital A/c Dr 2,500; To Calls in Arrears A/c 750; To Shares Forfeited A/c 1,750.
Q4 · 3 marks · Short answerHarder board level
The 250 shares above are reissued at ₹9 per share fully paid. Pass the reissue entry and find the Capital Reserve. (3 marks)
Hint
Discount ₹1 per share.
Answer
Bank Dr 2,250; Shares Forfeited Dr 250; To Share Capital 2,500. Capital Reserve = 1,750 − 250 = ₹1,500.
Q5 · 3 marks · Short answerHarder board level
800 shares were forfeited with ₹5 per share in Shares Forfeited. 500 are reissued at ₹8 fully paid (face value ₹10). Find the Capital Reserve and the balance left in Shares Forfeited. (3 marks)
Hint
Only 500 shares count for Capital Reserve.
Answer
Capital Reserve = 500 × 5 − 500 × 2 = ₹1,500; balance = 300 × 5 = ₹1,500.
Q6 · 1 mark · Assertion-reasonHarder board level
Assertion (A): There can never be a net loss on reissue of forfeited shares.
Reason (R): The discount on reissue cannot exceed the amount forfeited on those shares.
(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
Where does the discount come from?
Answer
(a) Both A and R are true, and R is the correct explanation of A.
Q7 · 6 marks · Long answerHarder board level
Shares of ₹10 issued at a premium of ₹3: ₹3 on application, ₹6 on allotment (including premium), ₹4 on call. A holder of 2,000 shares paid application and allotment but not the call; the shares were forfeited. 1,200 were reissued at ₹7 fully paid. Pass the forfeiture entry and find the Capital Reserve. (6 marks)
Hint
Premium was received; capital received ₹6 per share.
Answer
Share Capital Dr 20,000; To Calls in Arrears 8,000; To Shares Forfeited 12,000. Capital Reserve = 1,200 × 6 − 1,200 × 3 = ₹3,600.
Q8 · 3 marks · Short answerHarder board level
A company issued 36,000 shares, forfeited 700 and later reissued 450 of them. How many shares are included in subscribed capital? Explain. (3 marks)
Hint
Forfeited shares not reissued are held by no shareholder.
Answer
36,000 − 700 + 450 = 35,750 shares; the 250 unissued forfeited shares are not held by any shareholder.
Q9 · 6 marks · Long answerHOTS / competency
300 forfeited shares with ₹4 per share forfeited are reissued at ₹12 per share fully paid (face value ₹10). Pass the reissue entry and the Capital Reserve transfer. (6 marks)
Hint
No discount; a premium arises.
Answer
Bank Dr 3,600; To Share Capital 3,000; To Securities Premium 600. Shares Forfeited Dr 1,200; To Capital Reserve 1,200.
Q10 · 3 marks · Short answerHOTS / competency
700 shares of ₹10, ₹8 called up, were forfeited after ₹3 per share was paid. They are reissued as ₹8 paid up. Find the minimum total reissue price. (3 marks)
Hint
Paid-up value credited is ₹8, not ₹10.
Answer
Maximum discount ₹3; minimum price ₹5 per share; total ₹3,500.

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.Which account is credited with unpaid calls under the ISC method?Show answer
Calls in Arrears A/c.
2.Forfeited ₹4 per share; reissued at ₹1 discount: Capital Reserve per share?Show answer
₹3.
3.Is premium received debited on forfeiture?Show answer
No.
4.Where is Shares Forfeited shown?Show answer
Under Share Capital in the Notes to Accounts.
5.Are forfeited shares not reissued part of subscribed capital?Show answer
No.

Forfeiture and Reissue of Shares: frequently asked questions

Can forfeited shares be reissued at a premium?

Yes. The excess over face value is credited to Securities Premium, and the whole forfeited amount on those shares goes to Capital Reserve.

Why is Capital Reserve not free for dividend?

It is a capital profit, not earned from trading, so it is kept as a reserve.

Who decides to forfeit shares?

The directors, under the powers given in the Articles of Association, after due notice to the shareholder.

Does the forfeited amount include premium received?

No. Shares Forfeited is credited only with the capital money received; premium already received stays in Securities Premium.