Question

Z Ltd. purchased furniture costing ₹ 2,20,000 from C.D Ltd. The payment was to be made by issue of 9% Preference Shares of ₹ 100 each at a premium of ₹ 10 per share. Pass necessary Journal entries in the books of Z Ltd.

Answer 1

$Number of shares issued = 2,20,000/(100+10) = 2,000 shares$

Answer 2

1). Assets A/c        ...dr.         2,20,000

            To C.D. Ltd. A/c                          2,20,000

(Assets purchased from C.D. Ltd.)

2). C.D. Ltd. A/c        ...dr.      2,20,000

   To 9% pref. share capital A/c             2,00,000

   To securities premium A/c                    20,000

(being 9%(2000) preference

share Rs. 100 each issued at

Rs. 10 per share)

Explanation:

• Working note of above entries:
• No. of shares issued: 2,20,000/(100 + 10) = 2000 shares.
• A journal entry is defined as the record of transactions associated with the business in the accounting books.
• A correctly accounted journal entry includes the date of transaction, the debit amount, and the amount that will be deposited, details of the transaction, along with a specific reference number.
• This is the first and main book of accounting. Small traders whose number of transactions are limited, they use the journal as a book of initial accounts.

Learn more: journal entries

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