In this article we will discuss about the journal entries required for the issue of shares, explained with the help of suitable illustrations.
Many times, it is seen that shares have been allotted to persons or firms, from whom assets have been purchased. Such issues of shares have been clearly shown in Balance Sheet and distinguish such shares from shares issued for cash.
The journal entry is:
When the settlement is made by issue of shares of fully paid shares, such shares are known as shares issued for consideration other than cash. These shares may either be issued at par, or at a premium or at a discount.
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The entries are:
Promoters bring the company into existence. For this, they may be remunerated in the form of shares issued without payment.
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The journal entry for such transaction is:
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Illustration 1:
Prem Ltd. purchased assets of Rs. 1, 90,000 from Yogesh Ltd. It issued equity shares of Rs. 10 each fully paid in satisfaction of their claim.
Show the journal entries if such issues are made: (a) at par, (b) at a discount of 5% and (c) at a premium of 25%.
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Solution:
Illustration 2:
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A Company purchased land costing Rs. 2, 00,000 and in payment allotted 2,000 shares of Rs. 100 each, as fully paid.
Give journal entries and Balance Sheet.
Solution:
