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Journal entry to transfer asset into paid up capital

Ajay Singh Bhati (Manager (Accounts)) (215 Points)

08 November 2012

Dear Members,

Our company has purchased some machineries from a foreign company, which was enterred into books as Assets. The journal entry for the same was done as below:

Fixed Assets (Machinery) A/c Dr.

Foreign Supplier A/c Cr.

Now we want to increase our paid up capital by taking this machinery as investment into business. What would be the journal entry for this. Please suggest.

Thanks and regards

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6 Replies

CA Pooja Agarwal (Chartered Accountant) (3228 Points)
Replied 08 November 2012

i am doubtful whether that is possible.

lets see what others have to say

1 Like

Ajay Singh Bhati (Manager (Accounts)) (215 Points)
Replied 08 November 2012

I think I should change the language of my querry.

Please suggest me Can we use non cash consideration (such as Fixed Assets) to increase the paid-up capital of our company? and How?

I hope it sounds much better.

Regards

Kazi Md. Sazzad Ali (Senior Articled Student) (30 Points)
Replied 10 November 2012

We can use non cash consideration (such as Fixed Assets) to increase the paid-up capital of our company. How / Consideration: F.A. Dr. S.Capital Cr. In Bangladesh, we make agreement with both party in this reason, generally known as "Vendors Agreement" & submit Joint Stock Company as usual.

Nithin Chettoor (Assistant Manager) (388 Points)
Replied 03 December 2012

We can exchange assets in consideration of securities, but who is investing in nature of a machinery. The machinery is bought by the company itself na? And the shares are issued to a shareholder. The procedure goes like this. Sell the machinery to the proposed shareholder, then he may sell it back to the company and in consideration for the same the company may issue shares for the agreed consideration amount. You cant convert a company asset to share capital. Company cannot invest in company itself.

1 Like

CA PRIYUL SHAH (JOB) (901 Points)
Replied 29 November 2013

If you have made entry below

assets Dr

Foreign supplier Cr

Than for increasing Paid up capital you shall pass below entry

Foreign supplier Dr

Share capital Cr

Mind well that you should mention in balance sheet under paid up capital as share issued for other than cash

Ramkrishna Mokashi (Chartered Accountant) (734 Points)
Replied 29 November 2013

This is going to be a nightmare for Disclosure, international taxation, FEMA, and lots of other things.. Better way is to pay off the Vendor, and execute issue of Capital as seperate transaction (in cash)...

1 Like