GK
ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Capital A/ c
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General Issues
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Capital Reserve
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Profit & Loss A/c
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Detailed explanation-1: -Forfeited shares can be re-issued. Any amount of profit on re-issue is a capital receipt and should be transferred to capital reserve account because this profit is a capital gain for the company.
Detailed explanation-2: -The part of the gain on forfeiture which pertains to re-issued shares is transferred to capital reserve account.
Detailed explanation-3: -As the forfeited shares have been issued at a premium so no amount of discount is there to be adjusted from the forfeited amount hence the total forfeited amount of ‘ 600 is transferred to capital Reserve A/c as capital gain of the company.
Detailed explanation-4: -When a company sells off its assets and makes a profit, a company can transfer the amount to capital reserve. Since a company sells many assets and shares and can’t always make profits, it is used to mitigate any capital losses.