DESKTOP EDITION CLOUD EDITION SERVER EDITION GUIDES FORUM

Shares


#1

When receiving payments for shares, is the correct way to enter this as a “Sub-Capital” Account for shareholdings?

Would you then change the Capital Accounts to be a liability?


Recording purchase refundable share in another company (credit union)
#2

Capital accounts should be used to record funds contributed, drawings and profit allocated to proprietors of a business. Shares issued by a company are more appropriately accounted for as a special account under Equity.

Capital accounts are classified as a Liability or Asset if the business operates under a separate legal entity such as a Company and the proprietors track their drawings/funds contributed but not payments for shares.


#3

Thanks Tony.

You mentioned that

Capital accounts are classified as a Liability or Asset if the business operates under a separate legal entity such as a Company and the proprietors track their drawings/funds contributed but not payments for shares.

Wouldn’t it be the case that if you are a company, any funds contributed would be considered a liability for the purposes of the company?


#4

Yes, funds contributed are considered a liability but often drawings exceed funds contributed and the shareholder loan account swings from a liability to an asset.