Accounting Entries in case of FPO

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Querist : Anonymous

Querist : Anonymous (Querist)

13 November 2010 what entries co would pass in its books of Account since it is mere a stake sale.

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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13 November 2010 Accounting entry same as in case of any other Share issue.
Kept open for views of other experts.

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Querist : Anonymous

Querist : Anonymous (Querist)

13 November 2010 Since promoters is selling its take, so there will no further issue of shares by the company. Then what would be the accounting entry in that case?

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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13 November 2010 What i understand from your question it is a case of transfer. In this case no accounting entry required in the books of companies.
Only need to update its register of shareholders and same will be reflected in its annual return to be filed with ROC.

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Querist : Anonymous

Querist : Anonymous (Querist)

13 November 2010 Hi, thanks but how Co would account the cash which it has received via FPO,in the books of Accouts?

Aditya Maheshwari

Aditya Maheshwari (Expert)
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13 November 2010 When no cash is being received by the company u cannot account for the amount received in the FPO in the accounts of the company and if no shares are issued.

If cash is received then normal entries for allotment of shares.

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Querist : Anonymous

Querist : Anonymous (Querist)

13 November 2010 Thanks but i am still confused. I wanted to know that in case of FPO, the co is getting cash from the public. Also at the same time, Co is selling its stake (without issuing new shares), then how the cash would get accounted in their books?

Aditya Maheshwari

Aditya Maheshwari (Expert)
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13 November 2010 First of all the money is kept in an escrow account and not received by the company immediately. The escrow accounted is opened with the specific instruction of where the funds will finally go. So if the company is not going to receive anything then nothing will come to it and directly go to the shareholder selling his stake.

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