Shares issued are the number of shares held by investors valued at their published prices.
Remember that the issue will be made by adding the nominal value and the issue premium if any. The latter is a surcharge with which the issuer seeks to cover all or part of the issuance costs.
Investors subsequently subscribe to the issued shares, and all or part of their value is disbursed. The final example shows a simple accounting process for printing, subscription and payment shares.
Ledger Account 190 of Shares Issued
From an accounting point of view, account 190, “Issued shares or participations,” reflects the amount of the shares at their nominal value added to the issue premium, if any. For example, we have shared for a face value of 100 plus a bonus of 10. In total, the value is 110.
Its movement, regarding the accounting entries and the daily book, is simple. In the first phase, it will appear on the debit when we issue the shares. On the other hand, once they are subscribed, the account is cancelled, taking it to credit.
On the other hand, it appears with a negative sign in the current liabilities of the company’s balance sheet, reducing its value. The negative sign indicates that it reduces (not increases) the weight of that liability. In this way, you reduce the debt.
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Difference Between Issuance, Subscription and Disbursement
Before, we mentioned that we should not confuse emission with the subscription. The first refers to those shares that the issuer puts into circulation, and the second to those that investors agree to buy.
There is a concept similar to that of issued shares, the issued capital, which we should not confuse with the subscribed capital or the paid-up capital. Regarding the third, there is a rule in Spain, and it is that 100% of the premium must be paid and at least 25% of the nominal.
In short, we first issue, then some or all of the subscribed shares are subscribed and paid up. In this way, some payment of these issues may be pending, which, in this case, would be included in an account called “Members for unrequited disbursements”.
Example of Accounting Process of Issued Shares
Let’s look at an example of shares issued with a company incorporation accounting process. This is perhaps the easiest way to understand it. Let’s look at the statement and the entries first and then discuss them.
A company is formed by issuing shares worth $11,000. Of this amount, 10,000 correspond to the nominal value (share capital) and 1,000 to the issue premium, which must be added to the first. 100% is subscribed and disbursed, that is, all of them.
Note that the capital stock and share premium accounts, at the beginning of the process, are expressed with the phrase “pending registration”. This is so because we have not yet registered them in the commercial registry of our country since this is done at the end.
The process is straightforward and consists of four phases. The first is the issue, the second is the subscription. The third is the disbursement, and the fourth is the registration of the share capital. And the issue premium (if applicable) in the commercial register.
We see that there are accounts that are cancelled, first in the debit and then in the credit. These are the capital stock or the issue premium pending registration. The subscribers of shares and the account of issued shares.
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