SUBECT: ACCOUNTANCY

CLASS: XII(SESSION 2020-21)

UNIT 3 – ACCOUNTING FOR COMPANIES
Ch.- 8 Accounting for Share Capital
Handout -7

Issue of Shares/ Debentures for consideration other than cash

A company may issue Shares/Debentures for consideration other than cash for following reasons
(i) To vendor for the purchase of assets/ services /business
(ii) To underwriters against their commission
(iii) To Promoters for their services rendered

 On purchase of Assets / service

Date Particulars
Sundry Asset / Service ………………………… Dr
To Vendor A/c
(Being Asset Purchased or Service availed)

 On purchase of Business
 When Purchase Consideration is not given or Purchase consideration = Net Assets
Date Particulars
Sundry Asset / Service ………………………… Dr
To Sundry Liabilities
To Vendor A/c
(Being Assets and liabilities of another business purchased)

 When Purchase Consideration is more than Net Assets

Date Particulars
Sundry Asset / Service ………………………… Dr
Goodwill ……………………………………….. Dr
To Sundry Liabilities
To Vendor A/c
(Being Assets and liabilities of another business purchased)

 When Purchase Consideration is less than Net Assets

Date Particulars
Sundry Asset / Service ………………………… Dr
To Sundry Liabilities
To Vendor A/c
To Capital Reserve
(Being Assets and liabilities of another business purchased)
  For providing underwriter commission-
Date Particulars
Underwriting Commisssion ………………………… Dr
To Underwriters A/c
(Being underwriting commission due)

 For compensating Promoters for their services in the formation of a company

Date Particulars
Incorporation cost / Preliminary Expenses………… Dr
To Promoters A/c
(Being amount due to promotors)

Entry for the making payment in cash, bank or by accepting bill

Particulars
Vendor A/c ………………………… Dr
To Cash / Bank / Bills Payable
(Being amount paid)

Entries for the issue of securities for consideration other than cash

 When shares / debentures are issued at par

Particulars
Sundry Asset / Service ………………………… Dr
To Equity Share Capital/ x% Preference Share Capital / y% Debentures
(Being ______ shares / debentures issued at par)

 When shares / debentures are issued at premium

Particulars
Sundry Asset / Service ………………………… Dr
To Equity Share Capital/ x% Preference Share Capital / y% Debentures
To Security Premium Reserve
(Being ______ shares / debentures issued at premium)

W. N.
No. of shares / debentures issued = Amount Payable / issue price of 1 share or debenture
Issue price of 1 share/ debenture = Face value + Premium per share

 When Debentures are issued at discount

Particulars
Sundry Asset / Service ………………………… Dr
Discount on issue of shares …………………….Dr
To Y% Debentures
(Being ______ debentures issued at discount)

W. N.
No. of debentures issued = Amount Payable / issue price of debenture
Issue price of 1 debenture = Face value – discount per share