Stock Transactions

A. Issuance of Common Stock With a Par Value

When corporations issue stock they record the cash (or other asset) received and credit the common stock account at the par value (an amount established in the corporate charter). Any excess received above the par value is credited to "Paid-in-Capital in Excess of Par".


  Example:

  ABC Inc. issued 1,000 shares of $10 par stock at $14 per share.

                                            Debit    Credit
                                           -------  --------
    Cash                                    14,000
       Common Stock                                  10,000
       Paid-in-Capital in Excess of Par               4,000

B. Issuance of Common Stock With a Stated Value

If the stock issuance has a stated value instead of a par value, simply treat the stated value like a par value. Any excess received above the stated value is credited to "Paid-in-Capital in Excess of Stated Value".


  Example:

  ABC Inc. issued 1,000 shares of $10 stated value stock at $14
  per share.

                                            Debit    Credit
                                           -------  --------
    Cash                                    14,000
       Common Stock                                  10,000
       Paid-in-Capital in Excess of
          Stated Value                                4,000

C. Issuance of Common Stock Without a Par or Stated Value

If the stock issuance does not have a par or stated value, the entire proceeds from the stock issuance is credited to the stock account.


  Example:

  ABC Inc. issued 1,000 shares of at $14 per share.  There is no
  par or stated value

                                            Debit    Credit
                                           -------  --------
    Cash                                    14,000
       Common Stock                                  14,000

D. Acquistion of Treasury Stock

When a corporation purchases its own shares in the market with the intent to reissue the shares at a later date, the repurchased shares are known as "Treasury Stock". Treasury stock is recorded at cost with no consideration of par or stated values. The account is a contra-equity account meaning that it has a debit balance and is shown as a negative component of stockholders' equity on the balance sheet.


  Example:

  ABC Inc. purchases 300 shares of its own stock at $5 per share.

                                            Debit    Credit
                                           -------  --------
    Treasury Stock                          1,500
       Cash                                           1,500

  Note: Assume that this transaction is ABC's only Treasury stock.
        This example is continued in the section E on Reissuance
        of Treasury Stock.

E. Reissuance of Treasury Stock

If the corporation later reissues the Treasury Stock at more than it costs, the excess is credited to "Paid-in-Capital - Treasury Stock". A corporation can not show a gain from the sale of its own stock.


  Example:

  ABC Inc. reissues 100 shares of its Treasury Stock at $7 per share.

                                            Debit    Credit
                                           -------  --------
    Cash                                      700
       Treasury Stock (100 shares x $5 cost)            500
       Paid-in-Capital - Treasury Stock                 200

If the corporation later reissues the Treasury Stock at less than its costs, the deficit is removed from "Paid-in-Capital - Treasury Stock" up to the extent that any credit balance exists in that account. Any remaining deficit is debited against "Retained Earnings".


  Example:

  ABC Inc. reissues the remaining 200 shares of its Treasury Stock at
  $3 per share.

                                            Debit    Credit
                                           -------  --------
    Cash                                      600
    Paid-in-Capital - Treasury Stock          200
    Retained Earnings                         200
       Treasury Stock (200 shares x $5 cost)          1,000