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blurry
Feb 3, 2010, 09:32 PM
How to record ordinary shares and paid-up capital? If the money invested by director to the company is used to increased the paid-up capital, how should I record it?

morgaine300
Feb 5, 2010, 08:05 PM
It's called paid-in capital, not paid up capital. ;) It means like what was paid in to the company from investors.

When an investor buys stock (company "issues" it), then you debit cash and credit common stock, or some other class of stock if it's not common. It may be necessary to record the common stock at par. If this is for homework, you need to follow what your book is doing. Par is not used as much anymore, but textbooks still tend towards it.

If that's necessary, then you need to multiply par by the # of shares and record the Common stock at that amount. Then whatever is above that goes into an account called Paid-In Capital in Excess of Par (otherwise known as PIC). So 1000 shares of $1 par issued at $10 is:

$10 x 1000 = $10,000 debit cash
$1 par x 1000 = $1000 credit common stock
$9 excess x 1000 = $9000 credit PIC in excess (or just subtract $1000 from $10,000)