I wonder if anyone would be kind enough to give me a brief answer to the following:
I've just started doing the books for a start-up company who received £100K investment earlier this year. I've no details as yet - so far only seen the cash balance in the bank - but I understand that shares were issued to the investors, and as I will need to account for the incoming cash in the books, I was hoping to prep myself with the basics (this being the first company I've worked with who has received outside investment). The balance sheet before investment had Capital as follows:
Called up share capital 1,000 Share premium account 157,700
I would like to know what the normal accounting entry is for issuing shares, and if it is a one-step entry? Presuming ordinary shares were issued, I wonder if someone could give a basic example of what the bookkeeping entry would be i.e how exactly I show the increase (CR) to the capital account, and the movement between share accounts? Is this something that is solely within the arena of an accountant, or with all the information to hand, is it a fairly straightforward bookeeping entry? I will, I'm sure, meet the company's accountant before long and have his full support, but I would be interested in finding out the principles myself. I would be pariculary interested to know what questions I would need to ask, or which legal documents would provide, the elements of information I'd need to account for the investment.
Many thanks for anyone who takes the time to answer.
Sorry about this late reply (I hope it is still of some use) but as I remember it, the share premium account is the difference between what was paid for the shares and the value of the shares purchased. So, if someone bought 1,000 Ordinary £1 shares for £10,000....the bank would show Dr £10,000.......the share capital Cr £1,000 and the share premium Cr £9,000. You should get this information from the stautory books of the company which is usually something that is kept by the Company Secretary (or the solicitors acting as Co Sec). There should be a record of all share movements by type of share (if there are different categories other than the example Ordinary £1 shares) listing details of shareholders and amount which includes amounts paid, dates etc. Probably also a copy of the share certificate......or counterfoil.
