Free Republic
Browse · Search
General/Chat
Topics · Post Article

Skip to comments.

I have an accounting question.

Posted on 08/27/2009 8:20:11 AM PDT by LouAvul

On a balance sheet, where would the following entry be made?

"Capital Stock, $1 par, 10,000 shares issued and outstanding."

Is this an asset or liability and how is it handled?

Thanx.


TOPICS: Business/Economy
KEYWORDS: help
Navigation: use the links below to view more comments.
first previous 1-2021-4041-42 next last
To: IYAS9YAS
So using a debit card and a credit card cancels everything out, right?

Only if the difference between the square roots of the 3-digit security codes that you will find on the right on the back of your card is a prime number.

21 posted on 08/27/2009 8:35:14 AM PDT by Ready4Freddy (The time has come for someone to put his foot down. And that foot is me.)
[ Post Reply | Private Reply | To 15 | View Replies]

To: Ready4Freddy

Don’t forget the Accrued Dividends. FIFO FIFO, Fight, fight, fight.


22 posted on 08/27/2009 8:35:46 AM PDT by massgopguy (I owe everything to George Bailey)
[ Post Reply | Private Reply | To 19 | View Replies]

To: Ready4Freddy
Only if the difference between the square roots of the 3-digit security codes that you will find on the right on the back of your card is a prime number.

Man, I'm screwed; I though square roots were vegetables...

23 posted on 08/27/2009 8:38:15 AM PDT by IYAS9YAS (The townhalls were going great until the oPods showed up.)
[ Post Reply | Private Reply | To 21 | View Replies]

To: LouAvul

It belongs in the equity section. 100% sure...final answer.


24 posted on 08/27/2009 8:40:42 AM PDT by Above My Pay Grade
[ Post Reply | Private Reply | To 1 | View Replies]

To: LouAvul
“On a balance sheet, where would the following entry be made?
“Capital Stock, $1 par, 10,000 shares issued and outstanding.”
Is this an asset or liability and how is it handled?”

Nowhere, this is not a balance sheet entry. Capital stock is an Equity item, but the entry would have to represent the actual amount invested. Is this is a question for a course you are taking?

25 posted on 08/27/2009 8:42:26 AM PDT by detective
[ Post Reply | Private Reply | To 1 | View Replies]

To: LouAvul

Be careful, Grasshopper. Much of the advice on this thread will get you 5-10 at Leavenworth.

Very funny stuff but somewhat less than optimal in the GAAP sense.


26 posted on 08/27/2009 8:44:40 AM PDT by texmexis best (uencynd no)
[ Post Reply | Private Reply | To 1 | View Replies]

To: LouAvul
It's equity. The cash that you get would be the asset.

Debits to the left, credits to the right, debits = credits, fight, fight, fight!

27 posted on 08/27/2009 8:49:11 AM PDT by b4its2late (Ignorance allows liberalism to prosper.)
[ Post Reply | Private Reply | To 1 | View Replies]

To: detective

You are correct in that the total Capital Stock on the balance sheet would be the amount paid into the corporation for that stock.

If the investors paid the par value of $1.00 per share the entry would be:

Debit Cash $10,000
Credt Captial Stock ($1 par) $10,000

If they paid $10 per share it would be:

Debit Cash $100,000
Credit Capital Stock ($1 Par) $10,000
Credit Addtional Paid in Capital in Excess of par $90,000

The Additionl Paid in Capital in Exess of Par would also appear in the Equity section of the balance sheet.


28 posted on 08/27/2009 8:50:28 AM PDT by Above My Pay Grade
[ Post Reply | Private Reply | To 25 | View Replies]

To: LouAvul
LouAvul wrote:
On a balance sheet, where would the following entry be made?

"Capital Stock, $1 par, 10,000 shares issued and outstanding."

Is this an asset or liability and how is it handled?

Thanx.

First, the disclaimer, I am neither a lawyer nor a CPA.

Now for the basic Accounting. On a balance sheet, everything must balance. Hence the name. And the balance is this: Assets = Liabilities + Owner Equity (Capital).

Also, Debits always balance to credits. Assets have a debit balance, and increasing their value is a debit. Liabilities and Equities have a credit balance, and increasing those is a credit entry in a transaction.

So there is a transaction when you start your business. The owner(s) invest something of value (often cash that is deposited in the corporate bank account). This results in an increase in the value of the asset account (perhaps Cash in Bank Account) and a corresponding increase in owner equity account (Common Stock Outstanding).

State laws vary, but usually the stockholder(s) must invest the par value of the common stock when the corporation is formed as one of the first transactions on the corporate books. So, the transaction for the common stock issued would be a debit to Cash in bank of $10,000, and a credit to Common Stock of $10,000. If this were the only transaction, the balance sheet after this single transaction would be

Assets:
Cash in Bank               $10,000
                           -------
Total Assets               $10,000

Liabilities:
Total Liabilities                0

Owner Equity:
Common Stock Outsanding    $10,000
                           -------
Total Owner Equity         $10,000

It’s probably a little late now, but if you are starting a corporation for a new business, it’s best to start with a minimal value for the common stock. Setting up with 10,000 shares at a par value of $0.01 is common. This means you only invest $100.00 in owner’s equity at the formation of the corporation.

If you invest more cash in the business to get started, it’s often smarter from a legal and accounting standpoint to write a promissory note or bond from the corporation and loan the corporation money. You can then secure the loan to any assets the corporation holds or acquires. You can also make some income from reasonable interest on the loan. And if everything goes badly, your main loan is a secured loan, and you are one of the secured creditors for most of your investment, and split the assets at liquidation time with other secured creditors. Stockholders are at the end of the line if the corporation liquidates. So you’d rather be a secured creditor who loaned the corporation money than a common stockholder with an equity position.

Again, I am not an attorney or a CPA, and you should discuss these options with your CPA and your attorney before taking any actions.

Oh, and welcome to the world of entrepreneurship.

29 posted on 08/27/2009 8:51:54 AM PDT by cc2k (When less than half the voters pay taxes, it's called "taxation without representation.")
[ Post Reply | Private Reply | To 1 | View Replies]

To: Dutchboy88
No Par??????

Not his lexicon!

Balance Tricks can be cheeky!

30 posted on 08/27/2009 8:53:13 AM PDT by Young Werther ("Quae Cum Ita Sunt - Julius Caesar "Since these things are so!">)
[ Post Reply | Private Reply | To 9 | View Replies]

To: Ready4Freddy

Winner, winner, chicken dinner. (See my name.)


31 posted on 08/27/2009 8:54:45 AM PDT by PjhCPA
[ Post Reply | Private Reply | To 16 | View Replies]

To: cc2k

Since you are neither, you should not give advice as though you were. There could be consequences of setting that low a par value and only investing $100 in the corporation.


32 posted on 08/27/2009 8:56:57 AM PDT by PjhCPA
[ Post Reply | Private Reply | To 29 | View Replies]

To: Ready4Freddy

I like yours better!

Now I’m flashing back to my lost days at Cal State Fullerton, wallowing through all those business classes. LIFO, FIFO... Ack!


33 posted on 08/27/2009 8:59:14 AM PDT by Not A Snowbird (What came first? The word, or the thought behind the word?)
[ Post Reply | Private Reply | To 19 | View Replies]

To: IYAS9YAS
So using a debit card and a credit card cancels everything out, right?

I wish!

34 posted on 08/27/2009 8:59:58 AM PDT by Not A Snowbird (What came first? The word, or the thought behind the word?)
[ Post Reply | Private Reply | To 15 | View Replies]

To: 1rudeboy
>I hate pop quizzes

All accouting threads
are Freepers calling out for
more Anna pictures.

35 posted on 08/27/2009 9:11:28 AM PDT by theFIRMbss
[ Post Reply | Private Reply | To 3 | View Replies]

To: Ready4Freddy

as someone about to take the CPA this coming Monday, that had me ROFL!!!


36 posted on 08/27/2009 10:00:27 AM PDT by CharlieOK1 (Jimmy Carter: Now available in 1/2 black)
[ Post Reply | Private Reply | To 19 | View Replies]

To: b4its2late

LOL! You guys are killing me!


37 posted on 08/27/2009 10:01:54 AM PDT by CharlieOK1 (Jimmy Carter: Now available in 1/2 black)
[ Post Reply | Private Reply | To 27 | View Replies]

To: PjhCPA

If I pass the exam this Monday, I may see if I can change my username. I have always wanted to be a CPA.


38 posted on 08/27/2009 10:05:04 AM PDT by CharlieOK1 (Jimmy Carter: Now available in 1/2 black)
[ Post Reply | Private Reply | To 32 | View Replies]

To: CharlieOK1

Good Luck!


39 posted on 08/27/2009 1:08:53 PM PDT by PjhCPA
[ Post Reply | Private Reply | To 38 | View Replies]

To: CharlieOK1

Good luck, Charlie. The exam is always a fun time! Passed mine in 1978.


40 posted on 08/27/2009 1:52:26 PM PDT by Ready4Freddy (The time has come for someone to put his foot down. And that foot is me.)
[ Post Reply | Private Reply | To 36 | View Replies]


Navigation: use the links below to view more comments.
first previous 1-2021-4041-42 next last

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.

Free Republic
Browse · Search
General/Chat
Topics · Post Article

FreeRepublic, LLC, PO BOX 9771, FRESNO, CA 93794
FreeRepublic.com is powered by software copyright 2000-2008 John Robinson