- This topic has 7 replies, 2 voices, and was last updated 9 years ago by
.
- Posts
If the question says:
During 2012 the company made a bonus issue of shares that was funded from the share premium. Subsequently, also during 2012, it made another issue of shares for cash at their nominal value (at part).
Share capital (£1 per share): 25,000 (2012) and 21,000 (2011)
Share premium: 0 (2012) and 3,000 (2011)How do I treat this?
The way I did it (which must be wrong as it does not balance) was:
Under Cash Flows from Financing: I put 4,000 as proceeds from issue of shares.
Many thanks
In the situation of a bonus issue, no cash changes hands
The double entry is:
Dr Share Premium Account (in this case. Beware, it isn’t always funded from the Share Premium Account – it could be from a Capital Redemption Reserve or General Reserve or even Retained Earnings. But it’s most commonly from Share Premium)
Cr Share Capital Account
This is what has happened in the question
Dr Share Premium (thus eliminating it) $3,000
Cr Share Capital $3,000Then a new issue is made at par (not “at part” as you have written)
This is an issue of new shares at their face value (par) and the double entry here will be:
Dr Cash $1,000
Cr Share Capital $1,000IF these new shares had been issued at a premium of, say 40 cents, so the price for an individual share would have been $1.40, then the entry would have been:
Dr Cash $1,400
Cr Share Capital $1,000
Cr Share Premium $ 400Is that OK?
Many thanks for the speedy answer! 🙂
When you wrote:
This is an issue of new shares at their face value (par) and the double entry here will be:
Dr Cash $1,000
Cr Share Capital $3,000.You meant:
Cr Share Capital $1,000, not $3,000, right?
Does this mean that on the Cash flow statement under Cash from Financing activities, I have:
Proceeds from the issue of shares: $1,000, right?
I’ve corrected my careless $3,000!
Yes, cash from financing activities is $1,000 inflow
- You must be logged in to reply to this topic.