Q.Sara Company issues 10,000 equity shares of ₹ 10 at a premium of ₹ 2 each payable fully on application. Pass journal entries.

The capital a company raises by issuing shares is its share capital; the capital is divided into small units called shares, each with a nominal (face) value, and the holder is a shareholder. A company issues two types: equity shares and preference shares.

Equity shares are the most important source of long-term ownership capital. Equity holders get no fixed dividend — they are residual owners, paid whatever is left after all other claims, so they bear the greatest risk (though liability is limited) and, through voting rights, participate in management. Equity is permanent capital raised without any charge on assets and gives the firm creditworthiness, but returns fluctuate, it is costlier than other sources, and fresh issues dilute existing holders' control and earnings. …