Question

A Ltd. purchased plant from B Ltd. for Rs. 4,00,000 payable in fully paid shares of Rs. 100. Pass journal entries when shares are issued at par.

Hint:

When issuing shares at par for an asset purchase, the value of the asset is debited, and the share capital account is credited for the same amount.

Answer 1

Step 1: Understand the transaction.
A Ltd. has purchased a plant worth Rs. 4,00,000 from B Ltd., and the payment is made by issuing fully paid shares of Rs. 100 each at par.
Step 2: Pass the journal entry.
When shares are issued at par, the journal entry is as follows: \[ \text{Journal Entry:} \] \[ \text{Plant Account} \, \text{Dr. \, 4,00,000 \quad \text{(Value of the plant purchased)} \] \[ \text{Share Capital Account} \, \text{Cr. \, 4,00,000 \quad \text{(Fully paid shares issued at par)} \]