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Transferring advance from shareholders to paid up capital

A/c entries 204 views 1 replies

Sam Ghosh

21 Points Joined November 2017

Consider a company got registered in September 1st. But, before registration the promoter rented an office on August 1st. The landlord took one year rent in advace. Now, because the company got incoporated in September, 11 month rent will accrue from September. If we debit that 11 month rent as Advance Payment Current Asset and expense it monthly for 11 months.

For the advance rent paid by promoter, credit entry is in the Advance From Shareholders account.

Now, my question is - Can I transfer these amount from the Advance From Shareholders account to Paid-Up capital? What the journal entris should look like?

Replies (1)

satish

teaching

2046 Points Joined February 2009

1. any expenditure which is incurred during the period of pre incorporation period is called preliminary exp. these expenditure is to be recognised at Statutory General meeting.

when recognised entry is :

Preliminary exp a/c Dr. XXX

To Promoters a/c XXX

2. any amounts paid by subscribers on behalf of company, before incorporation is called promoters contribution. these advance are approved by director as on Statutory general meeting.

entry is:

Promoter's contribution a/c Dr. XXX

To Promoters a/c XXX

3. amount can be settle to promoters by issue of shares or by cash. but practically at the initial stage company does not have resources in cash. usually company will settle in the form of shares.

Promoters A/c Dr XXX

To Equity Share Capital XXX