How to account for cash investments

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I have a limited company whereby an individual has invested £10k for 5% of the shares.

Currently no shares at year-end will be paid out. This will be agreed when business is more mature and making profit. 

How is this accounted for?

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By David Ex
01st Jun 2024 11:03

Fjassociates wrote:

I have a limited company whereby an individual has invested £10k for 5% of the shares.

Currently no shares at year-end will be paid out. This will be agreed when business is more mature and making profit. 

How is this accounted for?

If you don’t know, your options are take an accountancy course or appoint an accountant. Why would an accountant on here offer you free advice?

I take it that a solicitor has drafted the agreement with the individual.

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Replying to David Ex:
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By FactChecker
01st Jun 2024 11:23

ditto ...

OP: BTW any advisor will, amongst other things, require clarification of "5% of the shares" (as in purchased 5% of existing shares from someone or purchased newly issued shares or ...).

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DougScott
By Dougscott
01st Jun 2024 13:33

Dr. Company bank account
Cr. Share capital.

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the sea otter
By memyself-eye
01st Jun 2024 18:35

How are shares 'paid out'?
Do you mean 'issued'?
Do you mean 'allocated'
How can an individual subscribe (for that is what this is) for 5% only for the exact allocation to be decided subsequently?
This whole deal sounds nuts.

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Stepurhan
By stepurhan
02nd Jun 2024 14:27

What does the share agreement say? What is the nominal value of the shares? Did the invidual get allotted the shares or purchase them from an existing shareholder? What type of shares?

Those are just questions off the top of my head, the answers to which could affect the accounting treatment. This is why paid for advice is worthwhile.

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By bettybobbymeggie
02nd Jun 2024 18:33

Fjassociates wrote:
Currently no shares at year-end will be paid out.

Presume OP means dividends.

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