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Hi Mike,
Here is a statement from the BPP Revision kit:
“A private company may allot shares for inconsiderate consideration by accepting goods or services at an over-value.”
What do they mean by “over-value’?
Thank you.
It means that the goods received were really not worth the value that had been placed upon them
For example, if a private company wishes to issue shares (say 1,000 $1 equity shares) in exchange for non-cash consideration (say a waste paper basket) then they may do so and the double entry would be:
Dr TNCA (waste paper basket) $1,000
Cr Share capital $1,000Can you see that it has allotted shares by accepting goods or services that have been overvalued?
OK?
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