Case 1. Where the subscription and payment are not simultaneous:
| (a) Subscribers | 150,000.00 | ||
| Capital Stock Subscriptions | 150,000.00 | ||
| To record subscriptions to the capital stock as follows: Ashares B” C” Etc. | |||
| (b) Cash | 150,000.00 | ||
| Subscribers | 150,000.00 | ||
| To credit subscribers for the payment of their subscriptions. | |||
| (c) Capital Stock Subscriptions | 150,000.00 | ||
| Capital Stock | 150,000.00 | ||
| To record the issue of stock to all subscribers who have paid in full. | |||
| (d) Organization Expense | 1,000.00 | ||
| Cash | 1,000.00 | ||
| To record the payment of the costs of organizing the corporation. | |||
Entry (a) sets up the claim under subscription contracts against the subscribers as an asset of the corporation, and is offset by the proprietorship account, carried under the title “Capital Stock Subscriptions,” until payment has been made and the certificates of stock actually issued to the stockholders.
Entry (b) is self-explanatory.
Entry (c) shows the issue of the certificates and therefore transfers the proprietorship from Capital Stock Subscriptions to Capital Stock.
Case 2. Where the subscription and payment are simultaneous:
| (a) Cash | 150,000.00 | ||
| Capital Stock | 150,000.00 | ||
| (b) Organization Expense | 1,000.00 | ||
| Cash | 1,000.00 | ||
In a small corporation where a cash investment constitutes the entire original capital, the entries shown in case 1 above are sometimes abbreviated as here indicated. In such a case there is often no formal subscription contract entered into and there is therefore no need to set up accounts with Subscribers and Capital Stock Subscriptions.
Second Method.
This method makes use of the memorandum accounts, Unissued Capital Stock and Capital Stock Authorized. Omitting the narrative statement of organization, the explanatory matter after the various entries, and the organization expense entry, which are common to all methods, the other necessary entries are as follows: