Question

Why discount on shares issue is a fictitious assets?

Answer 1

foctitious asset means something that really don't exist in business but we are showing them in the accounts for the sake of balancing accounts... if the company issues a share worth Rs. 100 for Rs.90 it is a discount issue of 10 rupee... by getting this 90 rupee as an asset, the business have to give a capital/ownership worth Rs.100 rupees.. to balance this gain and loss we treat discount as a fictitious asset. the entry will be as follows.

Cash/Bank a/c. Dr. 90
Discount on issue of share a/c Dr. 10
To Share Capital A/c. 100
( if the shares are issued by making calls then the call name must be written instead of the share capital a/c)