Ahluwalia Ltd. issued 1,000 equity shares of Rs. 100 each as fully paid-up in consideration of the purchase of plant and machinery worth Rs. 1,00,000. What entry will be recorded in company’s journal.
Journal of Ahluwalia Ltd.
| Date | Particulars | L.F. | Debit Amount (Rs.) | Credit Amount (Rs.) |
|---|---|---|---|---|
| Plant and Machinery A/c Dr. To Vendor (Plant and machinery purchased) | 1,00,000 | 1,00,000 | ||
| Vendor Dr. To Share Capital A/c (1,000 equity shares of Rs. 100 each issued as fully paid-up) | 1,00,000 | 1,00,000 |
Explanation
The question involves shares issued for consideration other than cash. As per the textbook context, when shares are issued at par for purchase of assets, two entries are recorded: (1) the asset account is debited and the vendor is credited to record the purchase, and (2) the vendor is debited and Share Capital Account is credited to record the issue of shares. Since 1,000 shares of Rs. 100 each are issued at par for plant and machinery worth Rs. 1,00,000, the amount matches perfectly with no premium involved.
Solution Steps
Step 1: Calculate total value of shares issued = 1,000 shares × Rs. 100 = Rs. 1,00,000
Step 2: Record purchase of plant and machinery by debiting Plant and Machinery A/c and crediting Vendor
Step 3: Record issue of shares by debiting Vendor and crediting Share Capital A/c with Rs. 1,00,000