What Is Forfeituere Together With Re-Issue Of Shares

FORFEITURE AND RE-ISSUE OF SHARES

Introduction
Influenza A virus subtype H5N1 companionship makes telephone telephone for the payment of installments of shares inwards accordance of articles of association. According to Nepal companionship act, 2064 (section 53). Every shareholder should live on sent a written uncovering inwards the prescribed format mentioning the calls to live on paid inside at to the lowest degree xxx days. If a shareholder fails to pay the calls inside the period, the companionship shall mail uncovering him/her giving an additional
Meaning of forfeiture of shares
Forfeiture of shares is the termination of membership in addition to taking away of the shares of a shareholder because of default inwards the payment of whatever installment except application money. In other words, it sometimes happens that when a shareholder fails to pay whatever installment (i.e.ither allocation or telephone telephone coin or both but non the application money) the companionship may forfeit (i.e. cancel) such shares, if in addition to then is authorized past times its articles of association. Such procedure of cancelling the shares in addition to non refunding the amount paid on these shares is known every bit forfeiture of shares.

menses of 3 months. If he/she doesn't brand payment fifty-fifty inside the period, his shares may live on forfeited. In the illustration of a world company, such uncovering shall live on published inwards a daily paper amongst national circulation for at to the lowest degree iii times.

When shares are forfeited, the scream of such defaulting shareholder is removed from the register of members, the allocation is cancelled in addition to the amount already paid past times such shareholder is forfeited i.e. non refunded to such shareholder.
Accounting for forfeiture of shares
When shares are forfeited, an entry called forfeiture entry is made inwards the books of the companionship tape the forfeiture of shares inwards the next circumstances.

Share working capital alphabetic quality a/c doc amongst called upwards value of share
Share premium a/c doc If premium is non received
Discount on number of part a/c Cr. If at that topographic point is discount on number of shares
Calls inwards arrears a/c Cr. Unpaid amount
Share forfeiture a/c Cr. Paid amount
Forfeiture of shares originally issued at par
Generally, on forfeiture of shares the part working capital alphabetic quality is reduced in addition to every bit such, "share working capital alphabetic quality account" is debited for the amount to the extent of calls made. Unpaid calls accounts are credited inwards guild to cancel their debit balances standing inwards the books. The amount already paid past times the defaulting shareholder is credited to part forfeiture account.

When a companionship forfeits those shares, which are originally issued at par, the next made inwards this situation.
Forfeiture of shares originally issued at premium
When a companionship forfeits those shares, which are originally issued at premium, the next 2 situations re fund piece making forfeiture entry regarding this:
a. When forfeiture takes house afterward receiving the amount of premium.
Share premium i time received in addition to credited to the part premium trouble organisation human relationship cannot live on cancelled; therefore, inwards this province of affairs both amount in addition to trouble organisation human relationship of premium are non shown piece passing forfeiture entry. In other words, if premium has already been received, it should non live on debited at the fourth dimension of forfeiture. The next entry is made inwards this situation:
b. When forfeiture takes house earlier receiving the amount of premium.
When a shares is forfeited on which the premium is due has non been received either wholly or partially, the part premium a/c must live on debited amongst the total amount of premium at the fourth dimension of forfeiture. The entry inwards this illustration volition be:

FOREITURE OF SHARE ORGINALLY ISSUED AT DISCOUNT
Discount on number of shares is commonly recorded at the fourth dimension of allocation of shares past times debiting it every bit a loss. When shares, originally issued at discount are forfeited, discount allowed on such shares is written back. In this situation, discount on number of shares a/c is credited amongst the amount of discount relating to forfeited shares.
FORFEITURE OF SHARES ISSUED ON PRO-RATE BASIS
The application coin of the shareholders to whom shares are allocation less than their need is adjusted on allocation in addition to subsequent calls. Therefore, their unpaid amount e'er becomes less than the amount due. I such condition, the calls inwards arrears in addition to amount forfeited is calculated every bit below:

RE-ISSUE OF FORFEITED SHARES

Forfeited shares are the belongings of the company. If an article of association of a companionship permits, the board of directors tin reissue these forfeited shares to the 3rd political party non to the defaulting shareholders.

All the forfeited shares tin live on reissued at a fourth dimension or they may live on reissued inwards parts. Similarly, these shares may live on reissued at par or premium or discount. Again, the amount of such reissue is collected inwards outflow total but non inwards installment.
A) Shares issued originally at par re-issued at par
Bank trouble organisation human relationship is debited in addition to part working capital alphabetic quality is credited when which were issued originally at par in addition to re-issued also at par.

CAPITAL RESERVE

After the reissue of forfeited shares, the credit residue left inwards the part forfeiture a/c is a working capital alphabetic quality gain to the companionship in addition to must live on transferred to "capital reserve a/c". Such gain is also known every bit lucre on reissue of forfeited shares

It should live on clearly understood that if the forfeited shares are non reissued, alone that proportion of shares forfeiture account, which belong to the reissued number of shares, should live on transferred to working capital alphabetic quality reserve account.
B) Shares issued originally at par but re-issued less than par
When shares originally issued at par in addition to re-issued at the value which is less than par value, banking concern trouble organisation human relationship is debited amongst issued price, shares forfeiture trouble organisation human relationship is debited amongst the discount on re-issued in addition to part working capital alphabetic quality is credited amongst par value.
C) Shares issued originally at par in addition to re-issued premium
Under this condition, banking concern trouble organisation human relationship is debited amongst the actual cost in addition to shares working capital alphabetic quality in addition to part premium trouble organisation human relationship is credited every bit below:
D) Shares issued originally at discount in addition to re-issued at discount
Under this situation, banking concern account, discounts on issued of part in addition to part forfeiture accounts are debited in addition to part working capital alphabetic quality trouble organisation human relationship is credited every bit below:
E) Share issued originally at premium in addition to re-issued at discount
Under this situation, banking concern account, in addition to part forfeiture trouble organisation human relationship are debited in addition to part working capital alphabetic quality trouble organisation human relationship is credited every bit below:
F) SHARES ISSUED ORGINALLY AT PREMIUM AND RE-ISSUED AT PREMIUM
Under this situation, banking concern trouble organisation human relationship is debited amongst the novel number cost in addition to part working capital alphabetic quality trouble organisation human relationship in addition to part premium trouble organisation human relationship is credited. No entry is made for the master copy premium.
REVIES OF THERETICAL
1. When in addition to how the shares of the companionship are forfeited?
If whatever shareholder fails to brand the payment of allocation or telephone telephone money, the companionship may forfeit such part the final result of forfeiture is that the scream of such shareholders is removed from the register of member, the allocation is cancelled in addition to the amount paid past times the shareholder is forfeited.
2. EXPLAIN WITH AN EXAMPLE THE PROCEDUTE FOR THE FERFEITURE SHARE ORGINALLY ISSUED AT DISCOUNT.
When shares originally issued at discount are forfeited, discount allowed on such shares is written dorsum every bit the amount shown on the debit of share. Discount trouble organisation human relationship must direct maintain a definite human relationship amongst the number of part genuinely issued. Following magazine entries is passed for forfeitures of part issued at discount.
3. WRITE SHORT NTOES ON RE-ISSUE OF FERFEITED SHARE.
The forfeited shares larn belongings of a company. the directors are authorized to re-issued such shares at par, premium or discount. The re-issue amount is debited to banking concern trouble organisation human relationship in addition to credited to part capital. The re-issued part at discount should non transcend the forfeited mount.

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