Share capital

Share capital is the most common method of providing a company with the finances to start and continue to run the company When a (always public and sometimes private) company is formed / created the promoter will specify the amount of the authorised share capital Empirically, when passed the reins of control, the directors will determine how much money they need to raise from the issue of some (or all) of the authorised share capital Say the authorised share capital (in a private company because the numbers are probably smaller and easier to type) is £100 share capital sub-divided into 100 shares of £1 each, the directors may decide to issue just 20 shares and thus raise £20. It could be that the directors ask for (say) £1.25 per share So an issue of 20 shares will raise £25 cash with £20 credited to Share Capital Account and £5 credited to Share Premium Account Later, the directors invite offers from shareholders for them to buy a further 36 shares credited as 60 pence paid The accounting double entry, on receipt of that money, would be: Dr Cash 36 * 60p £21.60 Cr Share Capital £21.60 That now means that we have 56 shares in issue, 20 of which are 'authorised, issued and fully paid' and 36 that are 'authorised, issued and partly paid' That missing 36 shares * 40 pence is uncalled share capital and the missing 44 shares are unissued share capital Our total Share Capital Account now has a balance of the initial £20 + this latest £21.60 giving a total of £41.60 paid up share capital Does that answer it for you?