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If 2,00,000 right shares of face value ₹10 are issued at a 20% premium, what is the correct journal entry for this transaction?

1. Bank A/c Dr. ₹24,00,000, To Share Capital A/c ₹20,00,000, To Securities Premium Reserve A/c ₹4,00,000
2. Bank A/c Dr. ₹20,00,000, To Share Capital A/c ₹20,00,000
3. Bank A/c Dr. ₹24,00,000, To Share Capital A/c ₹24,00,000
4. Bank A/c Dr. ₹20,00,000, To Share Capital A/c ₹16,00,000, To Securities Premium Reserve A/c ₹4,00,000

Correct answer: Bank A/c Dr. ₹24,00,000, To Share Capital A/c ₹20,00,000, To Securities Premium Reserve A/c ₹4,00,000

Solution

Each share has a face value of ₹10 and is issued at a 20% premium, so issue price per share is ₹12. For 2,00,000 shares, total money received is ₹24,00,000, of which ₹20,00,000 is share capital and ₹4,00,000 is premium.

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