Debit
Both of the above
Credit
None of the above
Answer is Wrong!
Answer is Right!
The correct answer is A. Debit.
When shares are forfeited, the share capital account is debited. This is because the company has lost the money that it was expecting to receive from the sale of the shares. The amount of the debit is equal to the face value of the shares that are forfeited.
The share capital account is a liability account. This means that it represents a debt that the company owes to its shareholders. When shares are forfeited, the company is no longer obligated to pay the shareholders the face value of the shares. As a result, the share capital account is reduced.
The following is a brief explanation of each option:
- Option A: Debit. This is the correct answer. When shares are forfeited, the share capital account is debited.
- Option B: Both of the above. This is incorrect. The share capital account is only debited when shares are forfeited.
- Option C: Credit. This is incorrect. The share capital account is only debited when shares are forfeited.
- Option D: None of the above. This is incorrect. The share capital account is debited when shares are forfeited.