Journal Entry for Issuance of Equity Shares in Consideration of Purchase of Plant and Machinery

When a limited company purchases plant and machinery, it can issue equity shares to the vendor as a consideration for the purchase. Here's how the journal entry for this transaction will look like:

Step 1: Record the Purchase of Plant and Machinery
The first step is to record the purchase of plant and machinery in the journal. Assuming the purchase was made on credit, the entry will be:

Plant and Machinery A/c Dr. 99,000
To Vendor's A/c 99,000

Step 2: Record the Issuance of Equity Shares
The company can issue equity shares to the vendor as a consideration for the purchase. The entry for this will be:

Vendor's A/c Dr. 99,000
To Equity Share Capital A/c 1,00,000
To Securities Premium A/c 1,000

Explanation of the Journal Entry
The first entry records the purchase of plant and machinery on credit. The plant and machinery account is debited, and the vendor's account is credited.

The second entry records the issuance of equity shares to the vendor as a consideration for the purchase. The vendor's account is debited for the value of plant and machinery, and the equity share capital account is credited for the face value of the shares issued. The difference between the face value and the purchase price of plant and machinery is credited to the securities premium account.

This journal entry ensures that the purchase of plant and machinery is recorded, and the issuance of equity shares to the vendor is also recorded. The equity shares issued are fully paid up, which means that the company has received the full consideration for the shares.