Question regarding issued share capital

[Rol]

Hi guys need some help here:

Person A and Person B incorporated a Pte Ltd company.

The issued share capital is $2, no. of shares issued is 2.
So the double entry is:
Dr Cash
Cr Capital Injection

Then they made a deposit of $5000 into the bank.
What should the double entry be, if there is no change in shares issued?

Also if an investor was to invest $5000 into the company, how should it be treated?

Thanks in advance.

 

[Fidget]

If it doesn't affect share capital, then treat it as a liability. The conditions of the deposit will tell you how to treat the credit side of it (the debit side being to the bank obviously). Same goes for the investor's $5k - the conditions attached to it will tell you how to treat it.

 

[Rol]

If it doesn't affect share capital, then treat it as a liability. The conditions of the deposit will tell you how to treat the credit side of it (the debit side being to the bank obviously). Same goes for the investor's $5k - the conditions attached to it will tell you how to treat it.

So it will be something like Debit Bank, Credit Long-term liability?

 

[Fidget]

Something like that. Dr bank, is a given since that's where the money is going, but the credit will depend upon the conditions that the money has been given. Might be long-term, might be short-term.

 

[Rol]

Ok thanks a lot!

Another question, if the investor wants to become a shareholder of the company, does that mean that the company will have to first increase the no. of stocks issued to more than 2 in order to allow the investor to buy into the company?

 

[Fidget]

yes, either that or purchase shares from existing shareholders.

 

[Rol]

Noted! Really appreciate your help!