accounting treatment for shares

System

Can anyone tell me what the accounting treatment is for ordinary shares issued but not paid at business start up?
I know that for issued shares paid it's Cr Share Capital Dr Bank and I believe that authorised shares are just stated on balance sheet no accounting entries made. :?

System

Re:accounting treatment for shares

You have two options here. If the shares have been issued to the director(s) then you could debit the directors loan account (this can usually happen when converting from a sole trader to a Ltd co). Alternatively you could create a debtor in the balance sheet to receive the debit and when payment is received debit bank/cash and credit debtors. Care must be taken, however, in debiting amounts to the directors loan account to ensure funds will be available at the end of a reporting period to repay amounts withdrawn for personal use by the directors from the company. This is normally done by way of dividend.

Authorised shares are not subject to accounting entries on commencement as they are the maximum number of shares the company is authorised to issue - though this concept is being abolished in the new companies act 2006. The authorised number of shares would normally appear as a note in the statutory financial statements underneath called up, issued and fully paid shares. It would not appear in the balance sheet - only the issued shares would appear in the equity section. The relevant notes would normally be prepared by your end of year accountants.

Regards
Steve

System

Re:accounting treatment for shares

Thanks for your help, I did not feel happy about debiting the Directors Loan a/c but it does make sense.