Oreon Ltd. grants 10,000 employee stock options on 1.4.2021 at ₹ 400. The market price of the share is ₹ 1,600. The vesting period is 2.5 years and the maximum exercise period is one year. 3,000 unvested options lapses o

In books of Oreon Ltd. Journal Entries Entry number Date Particulars Dr. (₹) Cr. (₹) 1 31.3.2022 Employee Compensation Expense A/c Dr. 48,00,000 To Employee stock option outstanding A/c 48,00,000 (Being compensation expense in relation to ESOP i.e. 10,000 options granted to employees at a discount of 1,200/- each, amortized on straight line basis over 2.5 years) 2 P&L A/c Dr. 48,00,000 To Employee Compensation Expense A/c 48,00,000 (Being expenses transferred to Profit & Loss A/c at year end) 3 31.3.2023 Employee Compensation Expense A/c Dr. 48,00,000 To Employee stock option outstanding A/c 48,00,000 (Being compensation expense in relation to ESOP i.e. 10,000 options granted to employees at a discount of 1,200/- each, amortized on straight line basis over 2.5 years) 4 P & L A/c Dr. 48,00,000 To Employee Compensation Expense A/c 48,00,000 (Being expenses transferred to Profit & Loss A/c at year end) 5 31.3.2024 Employee Stock Option Outstanding A/c (W.N.) Dr. 12,00,000 To General Reserve A/c 12,00,000 (Being excess of employee compensation expenses transferred to general reserve account) 6 30.6.2024 Bank A/c Dr. 24,00,000 Employee Stock Option Outstanding A/c Dr. 72,00,000 To Equity Share Capital A/c 60,000 To Share premium A/c 95,40,000 (Being 6,000 employee stock options exercised at an exercise price of ₹ 400/- each, assumed share face value of ₹ 10 each) 7 01.10.2024 Employee Stock option outstanding A/c Dr. 12,00,000 To General Reserve A/c 12,00,000 (Being Employee stock option outstanding account transferred to General Reserve Account in the lapse of 1,000 options at the end of exercise of option period) Working Notes: (₹) ESOP price 400 Share price (1,600) Difference 1,200 Granting of ESOP 10,000 Amount to be amortized (1,200 * 10,000) 1,20,00,000 Amount to be amortized over 2.5 years (1,20,00,000/2.5) 48,00,000 Unvested Options (₹) Options vested 7,000 Discount 1,200 84,00,000 Expenses recognized 96,00,000 Excess expense transferred to general reserve 12,00,000 Number of options vested 6,000 Discount 1,200 Options Vested * Discount 72,00,000 Expenses recognized 84,00,000 Excess 12,00,000