the par value of shares issued is normally recorded in the: This is a topic that many people are looking for. accountabilitynowpac.com is a channel providing useful information about learning, life, digital marketing and online courses …. it will help you have an overview and solid multi-faceted knowledge . Today, accountabilitynowpac.com would like to introduce to you Common Stock Issued With Par Value Vs No Par Value Accounting Detailed . Following along are instructions in the video below:
“Here we re going to be looking at recording common stock on our balance sheet. Sheet. When we issue it and we re going to be looking at the difference. Issuing common stock with a par value in without a par value and when we issue comments like what a par value we re creating here a liability for the company that s issuing the stock that is they can t reduce the stockholders equity in this common stock below its par value for either dividend payments or through any.
Other contra acquittee. Accounts. And also when we use this term. Here.
Par value it would have the same meaning here as stated value or face value. So all these terms here the par value stated value and face value are interchangeable alright for issuing common stock with a par value for our stockholders equity on our balance sheet. We d be increasing here our common stock or crediting our common stock account here for the number of shares. We issued times.
The par value that we assign to that common stock and then over here on our asset side of the out of the equation. We d be debiting or increasing our cash account here for the number of shares that were issued times. The issue price or that would be the actual price that we received when we issued those shares and then back over here on our stockholders equity side of the equation. We set up this account.
Additional paid in capital for common stock. And that s the excess that we received in cash here over what we recorded here in our common stock for our par value. So..
That s based on here. The number of shares that were issued times. The difference between the issue price and the par value of that common stock so looking at our debit and credit. Entries we had a credit here or increase of 4000 for additional paid in capital for common stock and a credit here of.
2000 in our common stock account for the par value and that 6000 here balances with the debit amount here that we received here in cash 6000. And then one also note here. If we issue our common stock. You re at the power value.
Then our additional paid in capital. Here for common stock would would be zero. Okay for issuing common stock with no power value our equity account here for common stock. We increase.
It here for the full amount that we received when we issued those stock so we credit. It or increase. It here for the full amount and that would be the number of shares that we issued times. The issue price or the actual price that we received only issued that stock and then over here on our asset side on the balance sheet.
We debit or increase our cash here for the number of shares that were issued times. The issue price or the actual price so our cash account here the debit amount of 6000 would balance with the credit amount here in our common stock account of 6000. Now when we use this no par value we do not create additional paid in capital here for common stock that account does not exist..
The full amount here is credited or increased here in our common stock account. Okay here. Let s look at issuing common stock below par value or at a discount for our equity account here in common stock we would increase it or credit. If you hit credited for the number of shares issued times.
The par value that we assigned to that common stock then over on our asset side for our cash we debit it or increase it for the number of shares that were issued times the discount price or that s the actual price we receive when we issued that stock and this discount price here is below the par value. So we needed balancing amount here on our inter equity. Account. And we use.
A stock discount. Account. And that s a contra account that we set up here to this common stock. So that we would debit or increase here for the number of shares.
We issued times. The difference here between the par value that we assign for that stock. Minus. The discount price that we received for that stock and in this case.
It would be a debit here let s we d increase. It by debiting up here so to look at our balance here between our assets and our equity. We d have a debit here and our cash account..
Plus this debit here in our stock discount account and that would balance here with the credit amount here in our common stock account now. We also had another option here we could have set up this additional paid in capital here to common stock. But what we would do in that case. We decrease.
Additional paid in capital for common stock for the difference here between the par value that we assign and the actual or the discount price that we received here in cash. Okay one other item here that is the stock issuance costs those are the costs involved when we re issuing this common stock. We could handle it in two ways here and number one here would be to directly reduce our stockholders equity account by using this additional paid in capital here to common stock and we debit. It or decrease.
It here for the issuing costs of those common stocks or number two we could set it up here as an asset on the balance sheet and capitalize. It and amortize it down. So setting it up here as an asset. Let s say would listed here.
Under organizational costs or debit or increase. That asset account. Here. And then we d set up this contra.
Asset. Account. Here..
Accumulated amortization of the stock issuance cost. So we as we amortize it we d credit our accumulated amortization here and then we d recognize as as an expense here in our income statement for the amortization of those expenses. So this accumulated amortization would eventually reduce our organizational costs here to zero. And then we would have recognized all those organizational costs here on our income statement.
Okay to summarize when we issued common stock with a par value our common stock account would include the number of shares. We issued times. The par value that we assigned to those shares and then our cash account here that would be increased here by the number shares issued times. The issue price or the actual price where you receive for those shares.
And then the excess here of the cash amount that we received over the common stock par value amount that we have assigned would be set up here in an account called additional paid in capital here to common stock. And that would be the number of shares that we issued times. The difference between the issue price minus the power value of those common stocks and then when we issued common stock with out up our value. The entire amount here is assigned to our common stock.
Account and then for our cash account. We would increase that by the number of shares. We issued times the issue price ” ..
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Accounting for the issuing common stock with par value versus no par value, issuing with par value creates a liability where stockholders equity can not be reduced below the par value of the stock for dividend payments or thru any other contra equity account, when issuing with no par value APIC (Additional Paid In Capital) does not exist full amount is recorded in the common stock account, example includes the accounting journal entries (T accounts) for common stock equity accounts and stock issuing costs as organizational costs amortized as an expense, detailed accounting calculations based on number of shares issued, par value and stock price along with recorded balance sheet and income statement journal entries by Allen Mursau
common stock, organizational costs, additional paid in capital, stock issue costs, par value, no par value, stated value, face value, issue costs, contra equ…