Sale of shares - accounting

If the Company has issued fresh Preference Shares to the Venture Capital Firm  the VC Firm brings in funds,then the following JE needs to be passed

1.  Bank A/c Dr

     To Venture Capital Firm A/c

2.  Venture Capital Firm A/c Dr.

       To Securities Premium

        To Preference Share Capital A/c

If the Shares are issued at Face Value, then there is no need to Credit Securities Premium A/c. 

According to my opinion, there is no need to pass any Journal Entry for the sale of existing shares by the individual shareholders to the VC Firm because the transaction does not concern the company. No fresh Capital is introduced to the Company and there is no change in the Share Capital of the Company. But the relevant Registers need to be updated and fresh shares are to be issued in the name of the VC Firm after they duely execute the Share tranfer Deed. 

Regards,

Viggi