The correct answer is: C. is transferred to capital reserve.
Share forfeiture is the cancellation of shares that have not been paid for in full. When a share is forfeited, the shareholder’s name is removed from the register of members and the shares are reissued. The balance of the share forfeiture account after re-issue of forfeited shares is transferred to capital reserve.
Capital reserve is a type of reserve that is created when a company has surplus funds. It can be used to offset losses, issue bonus shares, or pay dividends.
A. is added to paid-up capital is incorrect because paid-up capital is the amount of money that has been paid for shares. When a share is forfeited, the amount that has been paid for the share is not returned to the shareholder.
B. is added to goodwill account is incorrect because goodwill is an intangible asset that represents the value of a company’s reputation and customer base. When a share is forfeited, the company’s goodwill is not affected.
D. is transferred to share forfeiture A/c is incorrect because share forfeiture account is a temporary account that is used to record the amount of money that is owed by shareholders who have not paid for their shares in full. When a share is forfeited, the balance of the share forfeiture account is transferred to capital reserve.