Answered: i. Compare and contrast forfeiture of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

i. Compare and contrast forfeiture of shares and surrender of
shares. Explain in each case five circumstances under which
shares may be forfeited or surrendered.

ii. Differentiate between the following kinds of companies:
Statutory and Registered companies

Expert Solution

Step 1

(1) Forfeiture of Shares:

Meaning: Forfeiture of shares are very common that shareholder fails to pay allotment or calls money on its due date. It is a definite action taken on shares which are forfeited by the company.

The reason of forfeiture of shares happens because when the shareholder is not paying of call money on the due date.

The company takes initiative of forfeiture of shares.

The forfeiture of share will effect the reputation of a share holder as the company will take penal action against shareholder.

Circumstances when the shares are forfeited :

Injury to the shareholder.
Disability of the shareholder such as shareholder become Bankruptcy.
Redundancy to the shareholder.
Retirement of the shareholder
Death of the registered shareholder.

(2) Surrender of shares:

Meaning: Surrender of shares are the shares which are returned by the shareholder of the company. It is a voluntary return of shares by the shareholder of the company.

Surrender of shares takes place due to the inability to pay the call money by the shareholder of the company.

The shareholder of the company takes the initiative of surrendering of shares to the company.

Surrender of shares does not have any affect on the reputation of the shareholder, as it is his own voluntary action.

Circumstances when the shares are surrendered :

Shares are surrendered with exchange of old shares to new shares at the same nominal value.
Shares are surrendered by the shareholder when he knows the status of shares are going to be forfeited by the company.

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