Himakar Reddy (1 Points)
21 July 2021Hi.
I am confused with How would an entry look like in the Financial statements for two people coming together to form a company where
I am confused over issuing sweat equity / under consideration other than cash to Person 1.
Any help is appreciated. Thank you
CA. Sourav Sarkar
(Chartered Accountant )
(24578 Points)
Replied 21 July 2021
yasaswi gomes
(My grammar is 💯 good I)
(7290 Points)
Replied 21 July 2021
Give it in the form of bonus shares, this ways, person 1 will not use up his own equity. Or issue that from person 2 equity capital.
By Person 2 Equity a/c
By Loss on discount a/c
To Person 1 Equity a/c
Read that sweat is issued at a discount.
yasaswi gomes
(My grammar is 💯 good I)
(7290 Points)
Replied 21 July 2021
Or it took me a while to understand this crooked transaction. Technical know how fee is 1000, but sweat issued 1000, Equity is 1000, loss on issue is 100. This is besides capitals, company issued new sweat shares. Now equity becomes 2000.
By Bank a/c 900
By Loss a/c 100
To Equity a/c 1000
I hope this philosophy works without putting my job at risk
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