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On conversion of 4,000 fully-paid equity shares of ₹100 into Equity Stock, what entry is passed?
ADebit Equity Stock A/c, Credit Equity Share Capital A/c
BDebit Equity Share Capital A/c, Credit Equity Stock A/c
CDebit Capital Reserve, Credit Equity Stock
DNo entry needed
Answer & Solution
Correct answer: B. Debit Equity Share Capital A/c, Credit Equity Stock A/c
1. Step 1: Per Ch 14 illustration 2: "Equity Share Capital A/c Dr 4,00,000 To Equity Stock A/c 4,00,000".
2. Step 2: The transfer is simply book-keeping between accounts.
3. Step 3: Hence (A).
_Source: ICAI BoS CA Inter Paper 1, Ch 14 "Internal Reconstruction"_