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
i am doubtful whether that is possible.
lets see what others have to say
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
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.
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
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)...
CAclubindia
