Question

Chavi Ltd. purchased machinery from Neo Ltd. It was agreed that the purchase consideration will be paid by issuing 10,000 equity shares of Rs.10 each at a premium of 10% and a bank draft of Rs.50,000.
Pass the necessary Journal entries in the books of Chavi Ltd. for the above transactions.

Hint:

Ensure to account for both the face value of shares and the premium separately in the journal entry when issuing shares.

Answer 1

The journal entry for purchase consideration: \[ \begin{array}{|l|c|c|} \hline \textbf{Particulars} & \textbf{Dr. Amount (Rs.)} & \textbf{Cr. Amount (Rs.)} \\ \hline \text{Machinery A/c Dr.} & 1,50,000 & \\ \text{To Equity Share Capital A/c} & & 1,00,000 \\ \text{To Securities Premium A/c} & & 10,000 \\ \text{To Bank A/c} & & 50,000 \\ \hline \end{array} \]