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Common Shares

Expert: John R Mott

Aman asked:

How would I make accounting entry in the books when I issue share? I don't have much experience in this. I have a small business. I issued myself 100 shares for $1 each when stared up my business. That entry was easy DR cash CR common shares. Now I am issuing 100 more shares to my new partner for $10 each. I know the balance of shares should be 100+100=200 in CR and cash should be $100+1,000=1,100 DR but where would I put the difference. and What would I do when I sell these shares?

John R Mott answered:

The amount to be recorded for newly issued shares is generally equal to the amount paid for them. There is also no requirement that all common shares be issued at same price. Therefore, your original entry still applies: DR cash; CR common shares.

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