Lesson eLearning

A company issues 20,000 shares of ₹10 each at ₹12 per share. Prepare the journal entry for the issue.

easy 2 marks Class 12 · Accountancy · Accounting for Share Capital
Answer
Share Capital ₹200,000; Share Premium ₹40,000

The correct answer is Share Capital ₹200,000; Share Premium ₹40,000 — Credit Bank ₹240,000; debit Share Capital ₹200,000; debit Share Premium ₹40,000.

Step-by-step solution

  1. Total proceeds = 20,000 × ₹12 = ₹240,000.
  2. Par value per share = ₹10, so Share Capital = 20,000 × ₹10 = ₹200,000.
  3. Premium per share = ₹12 – ₹10 = ₹2, so Share Premium = 20,000 × ₹2 = ₹40,000.
  4. Credit Bank ₹240,000; debit Share Capital ₹200,000; debit Share Premium ₹40,000.
Common mistake: Mis‑calculating the premium amount

Concept tested: Issue of shares at premium

Published · How this solution was prepared and checked

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