An incorporated company issues 8,000 equity shares with nominal value ₹25 each at a premium of ₹5 per share. Prepare the journal entry for the issue of shares.

easy 1 mark Class 12 · Accountancy · Accounting for Share Capital

Answer

Cash Dr ₹240,000; Share Premium Cr ₹40,000; Share Capital Cr ₹200,000

The correct answer is Cash Dr ₹240,000; Share Premium Cr ₹40,000; Share Capital Cr ₹200,000 — Prepare entry: Cash Dr ₹240,000; Share Premium Cr ₹40,000; Share Capital Cr ₹200,000

Step-by-step solution

Nominal value of shares = 8,000 × ₹25 = ₹200,000
Premium per share = ₹5, so total premium = 8,000 × ₹5 = ₹40,000
Cash received = ₹200,000 + ₹40,000 = ₹240,000
Prepare entry: Cash Dr ₹240,000; Share Premium Cr ₹40,000; Share Capital Cr ₹200,000

Common mistake: Forgetting to debit cash or credit share capital correctly

Concept tested: Share issue at premium

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

← All Accounting for Share Capital questions