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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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.
Depends on what it is
"invested a non returnable sum" doesn't necessarily indicate a subscription for share capital
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 ...
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.
"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?
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 ...
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?