Question

Profit earned at the time of re-use of forfeited shares will be transferred to------Account.

• A. Share capital
• B. Profit and Loss
• C. Capital reserve
• D. Reserve capital

Answer 1

Answer:

C. Capital reserve

When forfeited shares are reissued, any profit made on the reissue (i.e., the amount received over the original issue price) is not treated as revenue. Instead, it is transferred to a Capital Reserve Account because it is a capital profit. Capital Reserve is used for purposes like writing off capital losses, issuing bonus shares, or strengthening the financial position of the company. Other options: Share Capital: Only records the nominal value of shares issued. Profit & Loss Account: For revenue profits, not capital profits. Reserve Capital: Portion of uncalled capital, not related to profit on reissue.