Q.Rajan Ltd. purchased machinery of ₹ 6,00,000 from Jagan Traders. It issued equity shares of ₹ 10 each fully paid in satisfaction of their claim. What entries will be made if such issue is made ?

Amount received above par value = premium → credited to Securities Premium account. Option (b).

A share has a face/par value (say ₹10). If a company issues it at ₹12, the ₹10 is capital and the extra ₹2 is a premium on issue.

• Share Capital account is credited only with the nominal (face) value called up.
• The excess over face value is a capital receipt and must be credited to the Securities Premium account (a statutory reserve with restricted uses under the Companies Act — e.g. issuing bonus shares, writing off preliminary expenses). …

Shares issued for the purchase of assets are credited to the Share Capital Account.

When a company buys assets and pays the vendor by issuing shares (Company Accounts, TN HSC Commerce), the entries are:

1. On purchase: Sundry Assets A/c Dr — To Vendor's A/c
2. On issue of shares to vendor: Vendor's A/c Dr — To Share Capital A/c …

Shares arrange Finance for a business.

Issuing shares (equity or preference) is one of the principal ways a public company raises long-term capital — investors buy shares and the company receives the sale proceeds as finance to fund its operations and expansion, in exchange for ownership rights/divid …

The excess of issue price over face value is share premium, credited to the Securities Premium account.

In the Tamil Nadu HSC Class-12 Accountancy syllabus (Company Accounts), a share has a fixed par/face value. A company may issue it at par, at a premium, or (rarely) at a discount.

• If shares are issued at a premium, the price charged is higher than the face value. Only the face value is credited to Share Capital A/c; the extra amount (the premium) is credited to the Securities Premium A/c.
• Securities premium is a capital reserve, governed by the Companies Act, and can be used only for specified purposes (issuing bonus shares, writing off preliminary expenses, providing premium on redemption, buy-back, etc.). …

The excess of issue price over par (face) value is share premium and is credited to the Securities Premium Account, so the answer is option (b).

When a company issues shares, the price collected can be split into two parts:

• The par (face) value, which goes to the Share Capital Account.
• Any amount collected over and above the par value, which is the premium.

Under the Companies Act, the premium collected cannot be treated as ordinary revenue or as share capital — it is a capital receipt kept in a distinct Securities Premium Account, whose use is restricted by law (e.g. issuing bonus shares, writing off preliminary expenses or discount on issue, premium on redemption).

Why the other options are wrong: …

On issue of shares for the purchase of assets, Share Capital Account is credited — option (d).

When a company buys assets and pays by issuing shares to the vendor, two stages arise:

1. On purchase: Sundry Assets A/c Dr, To Vendor's A/c.
2. On issue of shares to settle the vendor: Vendor's A/c Dr, To Share Capital A/c (and Securities Premium, if issued at a premium). …

Correct matching is (1)-(iii), (2)-(ii), (3)-(iv), (4)-(i) — option (d).

Matching each share-issue term to its meaning: