Forfeiture of Shares occurs when shareholder fails to pay calls and company seizes the shares (if articles permit). Conditions: Articles allow forfeiture, Proper notice given to shareholder, Notice period expired without payment, Board approves forfeiture. Accounting Treatment: Forfeited shares are removed from issued capital and can be re-issued. Journal Entry at Forfeiture: Debit Forfeited Shares Account (as credit to Share Capital), Debit Calls Receivable Recovery (to recover partial receipt), Credit Share Capital (for par value of forfeited shares), Credit Called-Up Capital (for amounts already paid). Example: 100 shares of £10 par value, £7 per share called (£6 paid); Forfeiture: Debit Forfeited Shares £1,000, Debit Calls Receivable £100, Credit Share Capital £1,000. Refund to Shareholder: Amount already paid may be refunded after re-issue or retained per articles. Journal Entry: Debit Bank (if re-issued at profit), Credit Forfeited Shares Account. Re-Issue of Forfeited Shares: At premium or discount depending on market conditions. Shares can be re-issued for less than par (premium/discount cannot exceed original call-up). Gain/Loss on Re-issue: Difference between amounts received and par value. Disclosure: Forfeited shares shown in Balance Sheet; details in notes regarding number and amounts. Exam tip: Master the journal entries for forfeiture and re-issue; understand the conditions for forfeiture; practice calculating gain/loss on re-issue; distinguish between calls receivable and forfeited shares account.