Record of warrants in Balance Sheet

Warrants are right options to the share holders.
Premium of share warrants are recorded under unsecured loans in Balance sheet.
Suppose if share price is less than the strike price, then nobody execute the warrants, then the premium amount is converted as cash.
If warrants are executed, then they recorded as equity shares.
I have given one example.please see the below sample balance sheet.

Suppose a company has 1,000,000 equity shares ,each of these has a face value of Rs 10/- each.

Balance shest

Assets                                  Liabilities

cash-10,000,000                     Equity shares 1,000,000 @Rs 10/-            10,000,000

Total assets=10,000,000         Total Liabilities =10,000,000

=====================================================================
If Company share price is Rs 500/-

New issued warrants are 500,000 and premium of  8%  with strike price of Rs 1000/-  and time period is 4 years.

Balance shest after issuing warrants of 8% premium

Assets                                  Liabilities

cash-30,000,000                     Equity shares 1,000,000 @Rs 10/-            10,000,000

                                                Unsecured Loans

                                                            New issued warrants 500,000

                                                            With 8% premium of  Rs 500/-    20,000,000

Total assets=30,000,000         Total Liabilities                                        30,000,000

=====================================================================

If warrants are executed, then the balance sheet is as follows.


Balance sheet -After executing the warrants

Assets                                  Liabilities

                                               Equity share Capital

cash-15,000,000                     Equity shares 1,000,000
                                                add:Warrants 500,000

                                                         Total-1,500,000@Rs 10/-             15,000,000

Total assets=15,000,000         Total Liabilities                                         15,000,000.



Once warrants are executed, these are treated as just equity shares..
So, Number of outstanding shares will increase, in this case it become 1,500,000.
while writing next year balance sheet,just we write as equity shares only.

After 3 years the share price is  Rs 1200/-

After executing the warrants with Rs 1000/-

New share price is

                                10,000,000*1200+500,000*1000   = 1133.33/-

                                                10,000,000+500,000