When shares are forfeited, which account is debited with the nominal called-up value of the shares?
Answer and explanation
Correct answer: D. Share Capital Account
- Step 1: Understand the journal entry for forfeiture of shares.
- Step 2: To cancel the membership and liability of the defaulting shareholder, Share Capital Account is debited with the called-up amount.
- Step 3: Calls in Arrears is credited for the unpaid call, and Share Forfeiture is credited for the amount paid.
Answer
Share Capital Account.
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