Coupon Accepted Successfully!


Issue of Shares at Discount

Shares are said to be issued at discount when they are issued at a price lower than the face value.

The excess of face value over issue price is referred to as ‘discount’.


For example, A Ltd. issues 10,000 shares of face value of ₹ 10 each at ₹ 9 per share. Here ₹ 1 (₹ 10 - ₹ 9) is treated as ‘discount on issue of shares’.

Section 79 of The Companies Act has laid down the following conditions subject to which the shares can be issued at discount:

  • The share must belong to a class already issued.
  • The issue must be authorized by an ordinary resolution of the company.
  • The sanction of the Central Government is to be obtained.
  • The maximum rate of discount should not exceed 10 per cent.
  • At least 1 year must have elapsed since the date on which the company was entitled to commence business.
  • The issue must be made within 2 months from the date of receipt of sanction.
  • The following journal entry must be passed for issue at discount:



  • The other journal entries will be the same as given in the ‘Issue of Shares at Par’.
  • Discount on issue of shares will appear on the assets side of the balance sheet under the head ‘Miscellaneous Expenditure’.
  • It is a fictitious asset and is to be written off by charging it to the securities premium account or profit and loss account over a period of time.
  • Discount on the issue of shares has to be accounted invariably at the time of allotment itself, unless otherwise specified in the problem.


Illustration 4


A Ltd. issued 10,000 equity shares of ₹ 10 each at ₹ 9 per share. The amount payable is as follows:

  • ₹ 2 on application
  • ₹ 4 on allotment
  • ₹ 3 on first and final call

Journalize the preceding transactions.



Journal Entries in the Books of A Ltd.

Test Your Skills Now!
Take a Quiz now
Reviewer Name