Premium paid on shares

Premium paid on shares

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Hi All,

A simple text book question and I should know the answer really but just wish to run it past you guys for confirmation.

A client has set up a catering company and the share split is 67% and 33%.

33% belongs to an investor who has invested a non returnable sum of £60k. This is the only money invested. The majority shareholder has not invested anything but was the one with the business concept / plan.

There are 100 shares set up with a nominal value of £1. £100 was banked for this.

So am i right in saying that the double entry for the investment would be obviously 60K bank and 60k to Share Premium?

Thanks all.

Replies (10)

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By johngroganjga
09th Feb 2015 14:07

So one shareholder has introduced £100 for 67 shares and the other has introduced £60k for 33 shares?

If so your share premium is indeed £60k, but not quite in the way you suggest in your question. A premium of £33 arises on the first issue and £59,967 arises on the second issue.

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By User deleted
09th Feb 2015 14:17

Depends on what it is

"invested a non returnable sum" doesn't necessarily indicate a subscription for share capital

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By khalm0
09th Feb 2015 15:43

OK - fair points.

So let me try to word the question slightly differently, I have probably confused it!.

 

A limited company set up with 100 shares split between 2 parties 33/67 at  £1 each.

One party has invested £60k but it is not repayable by the company.

How should I do the double entry?

It does not necessarily have to be related to the share issue but certainly not a creditor / DL.

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By User deleted
09th Feb 2015 16:02

No paperwork?

It would be unusual (and inadvisable) for someone to "give" £60k to a company and not expect something in return. But of course it can, and does, happen. What id the paperwork say on allotment of the shares? What did the investor think that he was getting for his money? The accounting treatment should follow the facts. Until we know what the facts are ...

 

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By khalm0
09th Feb 2015 16:59

Well technically they got the 33 shares for the 60k which makes it £1818 per share. But the reason I dont want to show it like that is because the 67 share holder did not put in any money (apart from the £67)

 

This is why I thought I would put it (except £33) to the share premim account. Then the only issue is that only 33 shares had a premium.

 

Does that make it clearer?

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By johngroganjga
09th Feb 2015 17:17

If you are satisfied that the 33 shares were issued on condition that he put in the £60,033 then of course the excess over £33 is share premium.  Not sure why you are reluctant to show it that way. The reason you give for being reluctant does not, with respect, make sense. No doubt you will check that the return of allotments at Companies House is consistent with your accounting, and take steps to correct it (i.e the return) if it is not. 

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By User deleted
09th Feb 2015 17:56

"technically"

What is that supposed to mean? What are the actual facts? What did the actual paperwork say? What were the intentions of all parties?

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By petersaxton
09th Feb 2015 19:19

Answers?

The more questions you ask will lead to more questions!

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By User deleted
09th Feb 2015 19:33

I realise that, Peter

But until the questions have been asked, one can only hazard a guess at the right answer. Who knows - depending on what was done, by whom, when and why, employment-related securities issues may need to be considered. Unlikely, but ...

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By Charlie Carne
11th Feb 2015 11:42

Just a suggestion.....

It's just a suggestion, but might a small proportion of the £60,000 investment be used to employ a qualified accountant who will deal with this correctly?

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