360 Capital Stock and Additional Paid-In Capital

Owner’s Equity

Net Worth

Synopsis

Account 360 is established to record the amount of capitalization for dealerships, which are organized as corporations.  This account cannot be used by dealerships set up as partnerships or proprietorships (see Account 380 Investments).

Example 1

Record the capitalization of a new car dealership.  The dealership was capitalized for $4,500,000 with the issuance of 10,000 shares with a par value of $100 per share.

Journal: Cash Receipts

Example 2

Record the retirement of 1,000 shares of treasury stock at par value.

Journal: General Journal

Comments

A credit balance represents the par or assigned value of capital stock outstanding and additional paid-in capital.

Note:

Separate general ledger accounts should be established for each class of stock and additional paid-in capital. The balances in these accounts should be combined with Account 360, Capital Stock & Additional Paid In Capital on the trial balance.

If a corporation purchases its own capital stock, one of the following procedures should be utilized.

A.     If the stock is retired, its par or assigned value should be recorded in Account 360, Capital Stock & Additional Paid In Capital.

Amounts paid in excess of par or assigned value should be recorded in Account 370, Retained Earnings.

If purchased for less, the discount should be credited to an account captioned Paid-In Surplus.  The balance in this account should be combined with Account 360, Capital Stock & Additional Paid In Capital on the trial balance.

B.     If the stock is not retired, it should be recorded, at cost, in an account captioned Treasury Stock. The balance in this account should be combined with Account 360, Capital Stock & Additional Paid In Capital on the trial balance.

C.    If legal considerations require a recording and operating report presentation different than outlined above, such procedure should be followed.