Why is forfeited shares A/c shown under the head subscribed capital in the balance sheet???
Forfeited shares represent a gain or surplus for the company Hence shouldnt it be shown under the head 'Reserves and Surplus'
Subscribed Capital represents the amount of shares for which applications from Public have been received. It represents liability towards the shareholders whereas Forfeited shares doesnt represent liability towards shareholders or any other person
Dear Student
Forfeited shares does not represent total gain or surplus for the company, It represents that amount which a company has received till now on the shares forfeited, Final gain or surplus shall only be calculated when these forfeited shares are reissued.
Now because Share forfeiture account represents amount received on issued shares , It shall be shown under subscribed capital in balance sheet , And as soon as forfeited shares are reissued the final amount of profit or loss on these shares shall be transferred from forfeiture account to capital reserve account.
Regards
Forfeited shares does not represent total gain or surplus for the company, It represents that amount which a company has received till now on the shares forfeited, Final gain or surplus shall only be calculated when these forfeited shares are reissued.
Now because Share forfeiture account represents amount received on issued shares , It shall be shown under subscribed capital in balance sheet , And as soon as forfeited shares are reissued the final amount of profit or loss on these shares shall be transferred from forfeiture account to capital reserve account.
Regards