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    Question

    A company issues 1,00,000 equity shares of ₹10 each at

    a premium of ₹5, payable as ₹5 on application, ₹5 on allotment (including premium), and ₹5 on first and final call. A shareholder holding 1,000 shares fails to pay the call money. What is the treatment in the company’s books?
    A Shares are cancelled immediately Correct Answer Incorrect Answer
    B Shares are forfeited; only premium refunded Correct Answer Incorrect Answer
    C Shares are forfeited; premium is not refunded Correct Answer Incorrect Answer
    D Shares are kept pending as calls-in-arrears indefinitely Correct Answer Incorrect Answer
    E None of these Correct Answer Incorrect Answer

    Solution

    Upon forfeiture, any amount received including premium is retained. The premium on shares is never refunded. The unpaid call money is treated as loss of capital and adjusted in the forfeiture account.

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