A company may issue shares for consideration other than cash such as against purchase of an asset or purchase of business or services taken, etc. Purchase of an asset or purchase of business and issue of shares are two separate transactions.
Thus, entry is passed for each transaction.
The Journal entries passed are:
(a) On Purchase of Assets
 Sundry Asset A/cs (Individually)                                      Dr.            [With the amount of purchase price]

                                  To Vendor’s A/c                                                      [With purchase consideration]
(b) On Purchase of Business

                        Sundry Asset A/cs (Individually)            Dr.                    [Agreed value of assets]

                                  Goodwill A/c*                                     Dr.

                  To Sundry Liabilities A/c (Individually)                                  [Agreed value of liabilities]

                  To Vendor’s A/c                                                                            [With purchase consideration]

                   To Capital Reserve A/c**
( Purchase consideration is the amount paid by purchasing company in consideration for purchase of assets/ business from other enterprise. It may be given in the question, otherwise it will be equal to net assets, or sundry assets minus sundry liabilities.)*
(c) On Issue of Shares
If shares are issued to vendor at par:

 Vendor’s A/c                                                        Dr.                   [With the nominal value of shares allotted]

                               To Share Capital A/c
If shares are issued to vendor at a premium:

 Vendor’s A/c                                                              Dr.                           [With the purchase price]

                    To Share Capital A/c                                                [With the nominal value of shares allotted]

                     To Securities Premium Reserve A/c                       [With the amount of premium]
(  Before passing the Journal entry, calculate the number of shares to be issued against purchase consideration as follows:
Number of Shares to be Issued shares = Purchase Consideration/Issue Price of a Share
Issue of Shares to Promoters
Sometimes companies issue Shares to Promoters for their services rendered to the Company .
The entries passed are:
Incorporation Expenses or Preliminary Expenses A/c                          Dr.

                                                        To Promoters’ A/c

 (Amount due to promoters)

Promoters’ A/c                                                                                                       Dr.

                      To Share Capital A/c

 (Issue of shares of each as fully paid to the promoters)
Issue of Shares to Underwriters
Underwriting means a contract by which a person, known as underwriter, agrees usually for commission to take the shares not subscribed by public. The company may issue shares to the underwriters, instead of paying the commission in cash.
The Journal entries in this case are:
Underwriting Commission A/c                                                                            Dr.

                         To Underwriters’ A/c

 (Underwriting commission due)

 Underwriters’ A/c                                                                                                       Dr.

                                 To Share Capital A/c

 (shares  issued to the underwriters)

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