Loan converted to shares

GianniGianni Feels At HomeRegistered Posts: 99
Hi,

Wondering if anyone can help. I'm preparing our usual monthly management accounts with this months being fairly complicated what with an EFG loan introduced, conversion of loan to shares and disposal of assets!

My question concerns the conversion of a loan to shares. The loan was for £50k and it's been converted to A Ordinary Shares of £1 each. Currently the company has authorised 100,000 ordinary shares of £1 each with 2 ordinary shares of £1 each allotted, called up and fully paid.

Is it as simple as a journal from the loan to share capital? Therefore share capital becomes 50002 and the loan goes to 0?

I'll review my CIMA textbooks when I get home but I seem to recall share premiums etc. but I thought that was only if shares were bought at a higher value than stated.

Any help appreciated.

Cheers

Comments

  • slackdaslackda Trusted Regular Registered Posts: 460
    Should a one to one conversion, the share premium would only cominto affect if the shares were being bought/sold at a higher rate than the ordinary value. i.e the loan was for 100K and was pruchaing 50k worth of shares, you would end up with Capital of ordinary share of 50002 and a share premium account showing 50,000.
    At least thats what i rember form my CIMA books and my final year of AAT for that.... :D
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