ABC purchased an asserts from sohan Rs 570000 and liabilities of Rs 30...
ABC purchased an asserts from sohan Rs 570000 and liabilities of Rs 30...
Journal Entries for ABC Ltd Company
1. Issuance of Shares at Par Value
- Equity Share Capital A/c Dr 570,000
- To Sohan A/c 570,000
- (Being assets purchased from Sohan paid by issuing equity shares at par value)
2. Issuance of Shares at Premium
- Equity Share Capital A/c Dr 456,000
- Securities Premium A/c Dr 114,000
- To Sohan A/c 570,000
- (Being assets purchased from Sohan paid by issuing equity shares at a premium of 20%)
Explanation:
When shares are issued at par value, the journal entry involves debiting the Equity Share Capital account for the total value of shares issued and crediting the seller's account. In this case, the entry would be made for the full amount of Rs 570,000.
When shares are issued at a premium, the journal entry includes debiting the Equity Share Capital account for the par value of shares (Rs 570,000) and debiting the Securities Premium account for the premium amount (20% of Rs 570,000 = Rs 114,000). The total amount debited would still be Rs 570,000, but the premium amount is separately accounted for in the Securities Premium account.
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