why is discount on issue of shares shown under current asset in balance sheet when it is supposedly an expense for the firm ? should it not more appropriately be shown under current liabilities ?
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When the shares are issued at discount and cash is realised, but the loss is not written off, it will be shown under assets side as expenses yet to be written off. It is basic accounting equation (Capital+Liabilities = Assets)
For eg: when the shares of Rs. 100 are issued at 90 and received Rs. 90 as cash, liability side Rs. 100 are shown under Capital & assets side Rs. 90 shown in cash and the balance of Rs 10 (100–90) is shown under balance sheet as “shares issued at discount”. It will be written off against security premium a/c or P&L a/c in future.
For eg: when the shares of Rs. 100 are issued at 90 and received Rs. 90 as cash, liability side Rs. 100 are shown under Capital & assets side Rs. 90 shown in cash and the balance of Rs 10 (100–90) is shown under balance sheet as “shares issued at discount”. It will be written off against security premium a/c or P&L a/c in future.
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