A company issued 10,000 shares of ₹100 each at ₹90 each. The issue is at a discount. As per Companies Act, 70% of the discount is transferred to Capital Reserve and the remaining 30% is written off as a loss. Compute: (i) Debit entry to Discount on Issue of Shares; (ii) Amount transferred to Capital Reserve; (iii) Amount written off as loss; (iv) Final credit to Share Capital. Also prepare the journal entry for the issue of shares.

Step-by-step solution

1. Discount per share = ₹100 - ₹90 = ₹10
2. Total discount = 10,000 × ₹10 = ₹100,000
3. 70% of discount to Capital Reserve = ₹100,000 × 0.7 = ₹70,000
4. 30% written off as loss = ₹30,000
5. Cash received = 10,000 × ₹90 = ₹900,000
6. Share Capital credit = 10,000 × ₹100 = ₹1,000,000
7. Journal entry: Cash Dr ₹900,000; Discount on Issue Dr ₹100,000; Share Capital Cr ₹1,000,000; Capital Reserve Cr ₹70,000; Loss on Issue Cr ₹30,000

Concept tested: Discount handling in share issue

Published 27 September 2026 · How this solution was prepared and checked