What Is a Share Premium Account?
Share premium (share premium) refers to the amount of money actually received by a company limited by shares issued at a premium exceeding the total par value of the shares. Equity premium is a type of capital reserve, and capital reserve refers to funds invested by an investor or others in an enterprise, the ownership of which belongs to the investor, and the amount invested exceeds the statutory capital. Capital reserve includes: capital (or equity) premium, non-cash asset preparation for accepting donations, equity investment preparation, appropriation transfer, foreign currency capital translation difference, related party transaction difference, and other capital reserve. [1]
Equity premium
- According to relevant regulations, a company limited by shares shall receive
- Equity premium
- Borrow: bank deposit 17 850 000
- Credit: Equity 15 000 000
- Capital reserve-equity premium 2 850 000
- It should be noted that for the establishment of a company limited by shares, the stock has not been fully subscribed due to various reasons, resulting in the failure of the issue. The issuer shall be responsible for the losses incurred in accordance with the regulations. Equivalent to this is that if the subscriber fails to pay the full amount within the prescribed period, the shareholders' rights will be lost. The prepaid deposit and paid shares shall be confiscated by the enterprise, and the originally recognized shares shall be separately raised by the enterprise. The confiscated shares shall be used as the company's capital reserve.
- Where a joint stock limited company has increased its capital to issue new shares and has fully paid for the shares, after the company registration authority has changed the registration and announced it, the share capital will be increased at the face value of the new shares issued. If the new shares are issued at a premium, the share issuance income exceeding the face value will be deducted from the issue cost. As equity premium.
- example. An overseas listed company increased its capital to issue 10 million ordinary shares on January 1, 2004, with a par value of 7 yuan per share and an issue price of 1 US dollar. The exchange rate between the US dollar and the renminbi at the date of receipt of the share was 1: 8.25. Preparation of accounting entries:
- Borrow: bank deposits-USD 82 500 000
- Credit: Equity 70 000 000
- Capital reserve-equity premium 12 500 000