Accounting treatment of issue of share for purchasing an fixed asset

In the situation when company want to buy any fixed asset , then company can issue shares to supplier of fixed asset .

At this time company pass the following journal entries :-

For purchasing fixed on credit
Fixed asset account debit xxx
Creditor account credit xxx
For issue of shares
Creditor account Debit xxx
Share Capital Account credit xxx
In case if company issue in premium or on discount to the suppliers of fixed asset . Then we first calculate the number of shares for doing any accounting treatment for this

In case of issue at premium

Numbers of shares
Value of Fixed asset
= ------------------------
Value of per share (Face value + premium)

In case if issue of shares at discount

Numbers of shares

Value of Fixed asset
= ------------------------
Value of per share (Face value – Discount per share)
After this the following journal entry will pass
Suppose xy company purchase the machinery of RS. 90000 by issue of shares at discount of shares of 10% if face value of share is RS.10
Journal entries
Machinery account debit 90000
Creditor account credit 90000
2 for issue shares to creditors at discount
No. of shares =90000/9 = 10000
Amount of discount =RS.10000

Creditor account Debit 90000
Discount on issue of share account debit 10000
Share capital account credit 100000
Suppose xy company purchase the machinery of RS. 120000 by issue of shares at Premium of shares of 20% if face value of share is RS.10
Journal entries
Machinery account debit 120000
Creditor account credit 120000
2 for issue shares to creditors at discount
No. of shares =120000/12 = 10000
Amount of Premium =RS.20000

Creditor account Debit 120000
Share capital account credit 100000
Security premium account credit 20000


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Accounting Education: Accounting treatment of issue of share for purchasing an fixed asset
Accounting treatment of issue of share for purchasing an fixed asset
Accounting Education
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