Any accoutants here? question at work related to paid in capital

[faba]

If anyone has accounting knowledge/practice the question is can paid in=capital ever be a negative value- (debit) Question where I work has arisen- on inception of a company they are not stating their shares outstanding times par because they say paid in capital would be negative with this scenerio..

If this makes sense anyone out there can help answer?

[drago]

If anyone has accounting knowledge/practice the question is can paid in=capital ever be a negative value- (debit) Question where I work has arisen- on inception of a company they are not stating their shares outstanding times par because they say paid in capital would be negative with this scenerio..

If this makes sense anyone out there can help answer?

I'm a banker, but don't work with corporate purchases.

I thought you could operate in the negative for things of this nature, its like 2 of 5 years you can? 3 of 5. I would think this would work for you, like i said, just a banker, not an accountant.

[RSJ]

I'm not sure why it would be negative. What is making up par? Are you mixing in past retained earnings into the formula? Please elaborate....

[faba]

I'm not sure why it would be negative. What is making up par? Are you mixing in past retained earnings into the formula? Please elaborate....

this what I am referring to

Can a company issue stock on their balance sheet at not the par value because they say at the company's inception it would produce a negative paid in capital.

Can paid in capital on a balance sheet ever be a negative value (debit) at any time-this is what they are claiming why they are not showing common stock value at par value on the balance sheet.

[Preston Howley III]

Yes, it is possible to have a negative PIC.

[faba]

Yes, it is possible to have a negative PIC.

Thanks Tom- any accounting priciples I can throw back at the co that is claiming this can never happen?

[RSJ]

Yes, it is possible to have a negative PIC.

What would the entry be then?

Faba - you could answer this as well.

[RSJ]

Faba - I don't see how any company could possibly have negative paid in capital.

[faba]

Faba - I don't see how any company could possibly have negative paid in capital.

rsherry where would the difference go to then -shares outstanding times par value gives the amount of common stock is the rule - the co is not showing that number for common stock on their balance sheet because they say they can not have negative PIC at inception

[RSJ]

rsherry where would the difference go to then -shares outstanding times par value gives the amount of common stock is the rule - the co is not showing that number for common stock on their balance sheet because they say they can not have negative PIC at inception

It would go to a discount account of some sort the same way a surplus would go to additional paid in capital.

[faba]

It would go to a discount account of some sort the same way a surplus would go to additional paid in capital.

What would that account be called in stockholders equity section.

Discount on common stock with a debit value maybe? Also is it true the co has to show the right amount for common stock based on par value- they are not doing this in the financials presented to my company. thanks for your help rsherry in advance.

[RSJ]

What would that account be called in stockholders equity section.

Discount on common stock with a debit value maybe? Also is it true the co has to show the right amount for common stock based on par value- they are not doing this in the financials presented to my company. thanks for your help rsherry in advance.

Paid in capital should be simply used for capital contributed to a corporation by investors on top of the par value of capital stock. In other words, the money that a company gets potential from investors in addition to the stated value of the stock.

Is there anyway you could pm me the transaction? You can use other rounded numbers if you like. This will help me with an account to use.

.

[RSJ]

Also is it true the co has to show the right amount for common stock based on par value- they are not doing this in the financials presented to my company.

If this is par value stock then yes it must show the par value amount. Any sale at less than value would be result in a contingent liability.

[faba]

Public thanks for your help rsherry

FB

[RSJ]

Public thanks for your help rsherry

FB

Anytime.

[Cant Hackett]

Faba, my first question is the other company

[faba]

Faba, my first question is the other company

[RSJ]

Faba, my first question is the other company

[Cant Hackett]

I agree CH, I said it should be put into a contingent liability account.

Btw, never knew we were in the same field. Pretty cool.

It was this or a funeral director. One way or another

[Preston Howley III]

Thanks Tom- any accounting priciples I can throw back at the co that is claiming this can never happen?

My accounting principles are not generally accepted.

[Olivia Willis]

To my knowledge, paid-in capital cannot be negative, as it is the amount of capital that has been contributed by investors in exchange for shares of stock. The par value of the shares is simply the nominal value assigned to the stock, and is not related to the paid-in capital amount. It's possible that the confusion arises from a misunderstanding of these concepts. Hope this helps!

 

I also provide accounting homework help services.

[TuscanyTile2]

 

This is awesome! Your 1st post was a reply to something written 16 years prior.

[Olivia Willis]

1 hour ago, TuscanyTile2 said:

This is awesome! Your 1st post was a reply to something written 16 years prior.

Oh right. In my defense, it was the second post, not the first.) I'll pay more attention.

[32EBoozer]

25 minutes ago, Olivia Willis said:

Oh right. In my defense, it was the second post, not the first.) I'll pay more attention.

Great response.... no matter how old the question!

[Jetsfan80]

@faba have we got this one sorted out now?

[SAM SAM HE'S OUR MAN]

On 2/17/2007 at 12:12 PM, faba said:

If anyone has accounting knowledge/practice the question is can paid in=capital ever be a negative value- (debit) Question where I work has arisen- on inception of a company they are not stating their shares outstanding times par because they say paid in capital would be negative with this scenerio..

If this makes sense anyone out there can help answer?

He should be fired immediately for bringing this question to a football website .

[TuscanyTile2]

10 hours ago, Olivia Willis said:

Oh right. In my defense, it was the second post, not the first.) I'll pay more attention.

My bad.  I read your timeline wrong.  That would've been a legendary first post though!  Heck of a 2nd post though!