How to book employee purchase of company 's stocks

[ablue]

Hello,

I am new to this website. I wonder if any of you can help me answering this question.
For example, an employee buys 100 shares of his company stocks for a total
of $1000. How should I book this transaction in quickbooks ? Thanks in advance

 

[ColinCPA]

Hello,

I am new to this website. I wonder if any of you can help me answering this question.
For example, an employee buys 100 shares of his company stocks for a total
of $1000. How should I book this transaction in quickbooks ? Thanks in advance

Here's how the entry should look:

DR Cash xx
CR Common Stock xx
CR Additional paid-in capital xx

Book to Common Stock the value of the 100 shares at par value. Book to APIC the difference between this and the proceeds.

 

[The Finance Writer]

Hey, ColinCPA. Your answer to ablue is correct, so I hope you won't mind if I trouble you with a slight variation on this issue. How does your answer change if the employee buys restricted stock? Do you handle the accounting for restricted stock purchases at small private companies like plans at large public companies or do you just use the same easy method you described for ablue?

 

[ColinCPA]

Hey, ColinCPA. Your answer to ablue is correct, so I hope you won't mind if I trouble you with a slight variation on this issue. How does your answer change if the employee buys restricted stock? Do you handle the accounting for restricted stock purchases at small private companies like plans at large public companies or do you just use the same easy method you described for ablue?

My understanding is that companies issue restricted stock to employees as a form of compensation, with the stipulation that the employee's rights to the stock do not vest until a certain term of service is completed. For the above situation, if the vesting period was, say, 5 years, you would record an entry at the end of the first year as follows:

DR Compensation Expense 200
CR Paid-in Capital - Restricted Stock 200

At the end of the five year vesting period, the entry would look like this:

DR PIC - RS 1,000
CR Common Stock (par)
CR APIC (diff)

 

[The Finance Writer]

My understanding is that companies issue restricted stock to employees as a form of compensation, with the stipulation that the employee's rights to the stock do not vest until a certain term of service is completed. For the above situation, if the vesting period was, say, 5 years, you would record an entry at the end of the first year as follows:

DR Compensation Expense 200
CR Paid-in Capital - Restricted Stock 200

At the end of the five year vesting period, the entry would look like this:

DR PIC - RS 1,000
CR Common Stock (par)
CR APIC (diff)

Thanks, Colin. I believe you are correct about making the entries as the stock vests. I think public companies have more disclosure requirements, but this system is very sensible and easy to understand for most businesses.