Forfeit example sentences



The management of a company is vested with the power to reissue the shares once forfeited by it, subject of course, to the terms and conditions in the articles of association relating to the same.In the event of all forfeited share not being reissued, the credit amount on forfeited shares' account relating to shares yet to be reissued is carried forward and the remaining balance on the account only is credited to capital reserve account.The balance, if any, left in the Share- Forfeited Account, should be treated as capital profit and transferred to Capital Reserve Account.Forfeiture means the cancellation of allotment due to breach of contract and to treat the amount already received on such shares as forfeited to the company.The precise accounting treatment of share forfeiture depends upon the conditions on which the shares have been issued — at par, premium or discount.In such circumstances, the company can forfeit their shares, i.e. cancel their allotment and treat the amount already received thereon as forfeited to the company within the framework of the provisions in its articles.When shares are forefeited all entries relating to the shares forfeited, except those relating to premium, already recorded in the accounting records, must be reversed.Where shares forfeited were originally issued at a discount, the discount applicable to such shares must be cancelled or written back.Hence, when a part of the forfeited shares are reissued, the whole balance of Share Forfeited Account cannot be transferred to the capital reserve.The balance of shares forfeited account is shown as an addition to the total paid-up capital of the company under the heading 'Share Capital' on the liabilities side of the balance sheet till the forfeited shares are reissued.The important point to be noted in this context is that the share premium account is not to be debited at the time of forfeiture if the premium has been received in respect of the forefeited share.Forfeiture of Shares issued at a Premium: Where shares were originally issued at a premium and the premium amount has been fully realised, and later on some share are forfeited due to non-payment of call money, the accounting treatment of forfeiture would be on the same pattern as in the case of shares issued at par.Normally, the forfeited shares are reissued as fully paid and at a discount.In such a case, the company has the authority to forfeit shares of the defaulters.Hence the Discount on Issue of Shares Account should be credited at the time of forfeitures.

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