When shares are forfeited, the Share Capital Account is debited with the called-up amount (not face value or paid-up amount).
Given information:
- Face value = Rs. 12
- Called-up = Rs. 10
- Paid-up = Rs. 8
- Calls-in-Arrears = Rs. 10 - Rs. 8 = Rs. 2
The journal entry for forfeiture would be:
| Account | Debit (Rs.) | Credit (Rs.) |
|---|---|---|
| Share Capital A/c | 10 | |
| To Share Forfeiture A/c | 8 | |
| To Calls-in-Arrears A/c | 2 |
The Share Capital Account represents the liability of the company towards shareholders for the amount called. Upon forfeiture, this liability ceases for the called-up amount only (Rs. 10), not the entire face value (Rs. 12), since the remaining Rs. 2 of face value was never called up and hence no liability existed for it.
Answer: Rs. 10