Corporation Accounting
Proforma Entries
Issuance of Shares
Particulars Dr. Cr.
Asset (Cash or Non-Cash) xx
Share Capital (Ordinary or Preference)* *xx
Share Premium (Ordinary or Preference)** **xx
*always recorded at par value for preference shares and at either par value or
stated value for ordinary shares. This account is used for issuance of shares.
**share premium is recognized for any amount in excess of par or stated value.
Subscription of Shares
Particulars Dr. Cr.
Cash (down payment) xx
Subscriptions Receivable (Ordinary or Preference) xx
Subscribed Share Capital (Ordinary or Preference) xx
Share Premium (Ordinary or Preference) xx
*always recorded at par value for preference shares and at either par value or
stated value for ordinary shares.
**share premium is recognized for any amount in excess of par or stated value.
Partial Payment for Subscription
Particulars Dr. Cr.
Cash xx
Subscriptions Receivable (Ordinary or Preference) xx
Full Payment for Subscription
Particulars Dr. Cr.
Cash xx
Subscriptions Receivable (Ordinary or Preference) xx
+
Subscribed Share Capital (Ordinary or Preference) xx
Share Capital (Ordinary or Preference) xx
*the full payment will require the issuance of shares. We only use the account
title “share capital” for fully paid shares. We only issue stock certificates upon
full payment.
Default or Delinquency of Subscription
Particulars Dr. Cr.
No entry.
Expenses on Delinquency Sale
Particulars Dr. Cr.
Receivable from Highest Bidder xx
Cash xx
Entries if with Highest Bidder
Particulars Dr. Cr.
Cash xx
Subscriptions Receivable (Ordinary or Preference) xx
Receivable from Highest Bidder xx
+
Subscribed Share Capital (Ordinary or Preference) xx
Share Capital (Ordinary or Preference) xx
Entries if without Highest Bidder
Particulars Dr. Cr.
Treasury Shares (at cost) xx
Subscriptions Receivable (Ordinary or Preference) xx
Receivable from Highest Bidder xx
+
Subscribed Share Capital (Ordinary or Preference) xx
Share Capital (Ordinary or Preference) xx
Entries if without Highest Bidder
Particulars Dr. Cr.
+
Accumulated Profits – Free xx
Accumulated Profits – Appropriated for Treasury Shares xx
*treasury shares would require entry for appropriation
equivalent to the cost of the shares.
Sources of Treasury Shares
❑Delinquency (defaulted subscription without highest bidder)
❑Acquisition (purchase from existing shareholders)
❑Donation (from existing shareholders)
Acquisition
Particulars Dr. Cr.
Treasury Shares (at cost) xx
Cash or Non-cash Asset xx
+
Accumulated Profits – Free xx
Accumulated Profits – Appropriated for Treasury Shares xx
Sale or Reissuance (other than donated)
Particulars Dr. Cr.
Cash or Non-Cash Asset xx
Share Premium – Treasury (1) xx
Accumulated Profits – Free (2) xx
Treasury Shares (at cost) xx
Share Premium – Treasury xx
+
Accumulated Profits – Appropriated for Treasury Shares xx
Accumulated Profits – Free xx
Donation
Particulars Dr. Cr.
Memo entry only: no cost to record as there was no
consideration provided/paid.
Sale or Reissuance (donated)
Particulars Dr. Cr.
Cash or Non-Cash Asset xx
Share Premium – Donated Shares xx
*all the proceeds will go to the share premium – donated
shares. No entry for the reversal of appropriation since there
was no appropriation made.
Appropriation of Accumulated Profits
❑Expansion Projects
❑Legal Requirements (e.g. Treasury)
❑Contingencies
*The portion appropriated will not be available for dividend
distribution to shareholders.
Called in various terms as Appropriated/Restricted/Surplus Reserved
Appropriation and Reversal
Particulars Dr. Cr.
Set-up:
Accumulated Profits – Free xx
Accumulated Profits – Appropriated for ________ xx
Reversal:
Accumulated Profits – Appropriated for ________ xx
Accumulated Profits – Free xx
Dividends (distribution to outstanding shares)
❑Cash
❑Property
❑Liability (Scrip or Bond)
❑Share Dividend or Bonus Issue
❑Scrip Dividend*
Proforma Entries (Cash, Property, Liability)
Particulars Dr. Cr.
Declaration:
Accumulated Profits – Free xx
______ Dividends Payable xx
Record: No journal entry, we just update the stock transfer book
Distribution:
______ Dividends Payable xx
Cash/Non-Cash Asset/Liability xx
Proforma Entries (Share Dividend – Large)
Particulars Dr. Cr.
Declaration:
Accumulated Profits – Free xx
Share Dividend Distributable (at par or stated value) xx
Record: No journal entry, we just update the stock transfer book
Distribution:
Share Dividend Distributable (at par or stated) xx
Share Capital (at par or stated) xx
*large = 20% and above. (@ par value; fair value is not reliable)
Proforma Entries (Share Dividend – Small)
Particulars Dr. Cr.
Declaration:
Accumulated Profits – Free xx
Share Dividend Distributable (at par or stated value) xx
Share Premium xx
Record: No journal entry, we just update the stock transfer book
Distribution:
Share Dividend Distributable (at par or stated) xx
Share Capital (at par or stated) xx
*Small = below 20% (@ fair value since it is reliable)
