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A Company issues 100,000 equity shares of Rs.10/- each at a premium of Rs.1/-. The entry in the books of account will be as follows:
Bank A/c Dr. Rs. 11,00,000/-
To Share Capital Account Rs. 10,00,000
To Securities Premium Account Rs.100,000/-
And the balance sheet will show the following picture
|
Liabilities
|
Amount (in Rs.)
|
Assets
|
Amount (in Rs.)
|
|
Equity Share Capital
|
10,00,000
|
Bank Account
|
11,00,000
|
|
Securities Premium Account
|
1,00,000
|
Other Assets
|
Xxxxxxx
|
|
Total
|
11,00,000
|
|
11,00,000
|
Now, the Company A wishes to purchase plant of Rs. 100,000 and in that case the entry in the books of accounts will be as follows:
Plant & Machinery A/c Dr. Rs.1,00,000
To Bank A/c Rs.1,00,000
Post this transaction the Balance sheet of the Company A will show this picture:
|
Liabilities
|
Amount (in Rs.)
|
Assets
|
Amount (in Rs.)
|
|
Equity Share Capital
|
10,00,000
|
Bank Account
|
10,00,000
|
|
Securities Premium Account
|
1,00,000
|
Plant & Machinery
|
1,00,000
|
|
Total
|
11,00,000
|
|
11,00,000
|
Is the above treatment valid?
Please provide any case laws/judgements to support the same.
Thanks and Regards
Sakshi Vaid