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mattkennedy86
August 31, 2020
Question

Tracking investment in business

  • August 31, 2020
  • 1 reply
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Hi

 

We've just started a business and have taken investment from several investors in exchange for some shares in the company.

 

Should I be making a separate equity account for each of these investors or tracking all the payments into the same  'ordinary shares account' that already exists by default?

 

 

Thanks
Natt

1 reply

S
SPOT3
September 20, 2020

From your question, I assume that each investor has paid an amount in excess of the nominal paid-up shares in the new company.

 

The accounting entries, at the most basic, involve crediting the existing share capital account (for the nominal value of the shares) and a Share Premium Account for the amount in excess of the paid-up shares.

 

At a more elaborate level, you may want to credit the full amount paid by each investor to the share premium account account, followed by a transfer out to the existing share capital account for the nominal value of the shares. Setting up sub-accounts under the Share Premium Accounts for each investor is a good practice too.

 

Search "share premium account or journal entry" on the internal for more...

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