Journal Entries for Issuing Equity Shares with Premium

Introduction
Satyam Ltd. has issued 10,000 equity shares of Rs. 100 each at a premium of Rs. 20 per share. The entire amount is payable on application, and the issue has been fully subscribed. We will now pass the necessary journal entries for this transaction.

Journal Entries
1. For receipt of application money
Bank Account Debit (100 × 10,000) Rs. 10,00,000
Share Application Account Credit (100 × 10,000) Rs. 10,00,000
(Being the application money received for 10,000 equity shares)

2. For allotment of shares
Share Application Account Debit Rs. 10,00,000
Share Capital Account Credit (100 × 10,000) Rs. 10,00,000
(Being the shares allotted to the applicants)

3. For receipt of share premium
Share Premium Account Debit (20 × 10,000) Rs. 2,00,000
Share Capital Account Credit (10 × 10,000) Rs. 1,00,000
Share Application Account Credit (10 × 10,000) Rs. 1,00,000
(Being the share premium received on the issue of shares)

Explanation
The above journal entries can be explained as follows:

1. For receipt of application money
When the company issues shares, it invites applications from the public to subscribe to those shares. The application money is the initial amount paid by investors to apply for the shares. In this case, Satyam Ltd. has received Rs. 10,00,000 as application money for 10,000 equity shares. Therefore, we debit the bank account and credit the Share Application account.

2. For allotment of shares
Once the company receives the application money, it allots the shares to the applicants. In this case, Satyam Ltd. has allotted 10,000 equity shares to the applicants. Therefore, we debit the Share Application account and credit the Share Capital account.

3. For receipt of share premium
When the company issues shares at a premium, it receives an additional amount over and above the face value of the shares. In this case, Satyam Ltd. has issued equity shares at a premium of Rs. 20 per share. Therefore, it has received Rs. 2,00,000 as share premium on the issue of 10,000 equity shares. Therefore, we debit the Share Premium account and credit the Share Capital and Share Application accounts.

Conclusion
The above journal entries show how Satyam Ltd. has issued equity shares with a premium and received the application money, allotted the shares, and received the share premium. These entries will help the company maintain the proper books of accounts and keep track of its financial transactions.