Shared capital - explanation needed

kikaro1995

Hi guys,
I have a stupid question, but I totally don’t understand how the share capital works. I am self studing and english is not my first language... I just need to get my head straight.
How it works? Does it must to be paid into company account by shareholder? If yes, when? And what is the entries? How it influence on final accounts?

I would really appreciate if someone explain this please

Pian32

Share Capital is what has been contributed by the share holders of a company.

In a limited company the full value of the share is all that the share holder is liable for if the company gets into difficulty. In lots of cases this is already paid in full and in AAT that's what it'll be (I've not come across a question where that isn't the case in AAT). You can basically just treat it as a separate capital count.

It is possible to not have fully paid for a share (25% of nominal is minimum) however the company can call up the funds from those holders if needed so they are still liable for any of the unpaid value including if the company winds up or goes into liquidation..

AndrewG

The shareholders of a company are its owners.
When a private limited company (e.g Acom Ltd) is incorporated (started) they will issue shares to the owner or owners (and tell Companies House they have done so as part of the incorporation process).
For a public limited company (e.g Acom PLC) shares are usually issued during an Initial Public Offering (IPO) - when members of the public can buy shares in a companybeing listed on the stock market for the first time.

Let's take a simple limited company that is going to be owned by a husband and wife on a 50:50 basis.
During incorporation they tell Companies House how many shares they are issuing in the company and how much each share is worth. In this case let's say each person gets 10 shares with each share having a face value of £1.
So 20 shares at £1 each means the share capital is £20.

This is recorded as the following transaction in the books:
Dr Called up share capital not paid £20
Cr Shares issued £20

The called up share capital not paid would be shown in the Statement of Financial Position of the final accounts as an Asset (because it is money owed to the company by the shareholders), and the Shares Issued (or Share Capital) would be shown in the Capital and Reserves.

Once the shareholders pay the compnay for the shares they have received the transaction will be:

Dr Cash £20
Cr Called up share capital not paid £20

Hope this helps a bit.

StanHansen

Oh, couldn't you just google your question in your own language? Anyway, let me explain to you what share capital is.

It is the fixed capital of a joint-stock company, which is formed by issuing shares. The reserve fund is a part of the company's own funds; its value is determined by the company's constituent documents. The value of a stock on the balance is usually less than its actual value; the smaller this gap, the more preferable the stock is valued. By buying shares, an investor legally owns a certain percentage of that company. That is also called as Share trading or Equity trading.

Source: forexrb.com