Select the TRUE statement related to the issue/re-issue of equity shares.

Equity Shares can be re-issued at Discount.

The correct answer is Option (2) → Equity Shares can be re-issued at Discount.

1) Equity Shares cannot be issued at Discount- This is incorrect. There are instances when the shares of a company are issued at a discount, i.e. at an amount less than the nominal or par value of shares, the difference between the nominal value and issue price representing discount on the issue of shares. For example, when a share of the nominal value of Rs. 100 is issued at Rs. 98, it is said to have been issued at a discount of two per cent. As a general rule, a company cannot ordinarily issue shares at a discount. It can do so only in cases such as ‘reissue of forfeited shares’ (to be discussed later) and issue of sweat equity shares. 

2) Equity Shares can be re-issued at Discount- This is correct.  Forfeited shares (shares taken back due to non-payment) can be re-issued at a discount, but the discount cannot exceed the amount forfeited. This is re-issue, not fresh issue. The journal entry for reissue at discount is as follows- 
Bank A/c Dr.
Shares Forfeiture A/c Dr.
       To Share Capital A/c

3) Equity Shares cannot be issued at premium- This is incorrect. Equity shares can be issued at a premium. It is quite common for the shares of financially strong and well-managed companies to be issued at a premium, i.e. at an amount more than the nominal or par value of shares. Thus, when a share of the nominal value of Rs. 100 is issued at Rs. 105, it is said to have been issued at a premium of 5 per cent. When the issue of shares is at a premium, the amount of premium may technically be called at any stage of the issue of shares. However, premium is generally called with the amount due on allotment, sometimes with the application money and rarely with the call money. The premium amount is credited to a separate account called ‘Securities Premium Account’ and is  shown under the title ‘Equity and Liabilities’ of the company’s balance sheet under the head ‘Reserves and Surpluses’.  The journal entry for issue of shares at premium is as follows- 
Bank A/c Dr.
       To Share Capital A/c
       To Securities Premium Reserve A/c

4) Equity Shares cannot be re-issued at premium- This is incorrect. Re-issue of forfeited shares can be done at premium, and the premium is treated as capital profit. The journal entry for reissue at premium is as follows- 
Bank A/c Dr.
       To Share Capital A/c
       To Securities Premium Reserve A/c