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 rupee10 each at a premium of 10% and a bank draft of rupee50,000. Pass the necessary Journal entries in the books of Chavi Ltd. for the above transactions.
Chavi Ltd. purchased machinery from Neo Ltd. It was agreed that the purchase consideration will be paid by issuing 10,000 equity shares of rupee10 each at a premium of 10% and a bank draft of rupee50,000. Pass the necessary Journal entries in the books of Chavi Ltd. for the above transactions.
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Ensure to account for both the face value of shares and the premium separately in the journal entry when issuing shares.
Updated On: Feb 5, 2025
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Solution and Explanation
The journal entry for purchase consideration: 
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Top Questions on Accounting for Share Capital
- Following is the extract of the Balance Sheet of Vikalp Ltd. as per Schedule-III, Part-I of Companies Act as at 31st March, 2024 along with Notes to accounts:
% [Balance Sheet Extract & Notes shown in Question] Notes to accounts' as at 31st March, 2023 \& 2024 show changes in Share Capital.
Analysis from Notes:
As at 31-3-2023: Issued \& Subscribed Capital: 5,00,000 equity shares of Rs 10 each, fully paid up = Rs 50,00,000.
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