Journal Entries for Issuance of Shares at a Discount

The issuance of shares at a discount involves offering shares to the public at a price lower than their nominal value. In this scenario, PQ Ltd. issued 1,00,000 shares with a face value of Rs. 10 each at a discount of 10%. The discount is payable in two installments: Rs. 4 on application and Rs. 5 on allotment.

To record the issuance of shares at a discount, we need to make the following journal entries:

1. Application Stage:
When the shares are applied for by the prospective shareholders, the following journal entry is made:

Share Application Account Dr. (Number of Shares Applied * Discounted Price per Share)
To Share Capital Account (Number of Shares Applied * Face Value per Share)
To Share Application Money Account (Number of Shares Applied * Discount per Share)

Explanation:
- The Share Application Account is debited to record the shares applied for at the discounted price.
- The Share Capital Account is credited to record the nominal value of the shares applied for.
- The Share Application Money Account is credited to record the discount amount received.

2. Allotment Stage:
Once the shares are allotted, the following journal entry is made:

Share Allotment Account Dr. (Number of Shares Allotted * Discounted Price per Share)
To Share Application Account (Number of Shares Allotted * Discounted Price per Share)
To Share Allotment Money Account (Number of Shares Allotted * (Discount per Share - Allotment Amount))

Explanation:
- The Share Allotment Account is debited to record the shares allotted at the discounted price.
- The Share Application Account is credited to reverse the entry made at the application stage.
- The Share Allotment Money Account is credited to record the additional amount received on allotment.

3. Final Entry:
After the allotment of shares, the following entry is made to close the Share Allotment Account and transfer the balances to the Share Capital Account:

Share Allotment Account Dr. (Total amount in the account)
To Share Capital Account (Total amount in the account)

Explanation:
- The Share Allotment Account is debited with the total amount received on allotment.
- The Share Capital Account is credited to record the increase in share capital.

Note: In this case, as all the shares offered were subscribed for and the money was duly received, there will be no entries related to calls-in-advance or calls-in-arrears.

These journal entries will accurately record the issuance of shares at a discount in the books of PQ Ltd.