CLASSIFICATION OF LEDGER ACCOUNTS FOR CREAMERIES. 21 



Debit Credit. 



$10, 000 Subscription account. 



Capital stock $10, 000 



For subscription shown on subscription list No. 1. 



Debit. Credit. 



$4,000 Cash. 

 1, 000 Notes Receivable. 



Subscription account $5, 000 



50 per cent payment of the following subscriptions: 

 (List of those making payment.) 

 In case the entire capital stock is paid at one time, the following method might be 

 used. 

 Entries to illustrate issue of capital stock and payment thereof: 



Debit. Credit. 



$8,000 Cash. 

 2,000 Notes Receivable. 



Capital Stock. . $10, 000 



(Representing payment of capital stock issued to the following:) 

 When shares of stock are acquired or sold for more or less than par value, the prem- 

 ium or discount should be charged or credited as the case may be to Premium and 

 Discount on Capital Stock account. For example, if a going concern desires to sell 

 additional shares, the shares being above par in value, an entry should be made as 

 follows: 



Debit. Credit. 



$105 Cash. 



Capital Stock $100 



Premium and Discount on Capital Stock 5 



(For sale of one share of stock at $5 premium . ) 

 Likewise, if shares were sold at a discount, there would be a debit to Premium 

 and Discount on Capital Stock. 



The balance in this account should be written off into the Surplus account by 

 periodical charges usually extending over a term of years. 



It occasionally happens that capital stock is offered for sale, and is purchased by 

 the organization, to be held for resale at some future date. While this transaction 

 may seem to resemble closely a retirement of the capital stock so purchased, and 

 as such chargeable to the Capital Stock account, accountants generally have preferred 

 to charge a purchase made in this manner to an account called Treasury Stock. In 

 case the purchase was made above par, the entry should be: 



Debit. Credit. 



$105 Treasury Stock. 



Cash $105 



(For purchase of one share of stock from Chas. Brown at $5 



premium.) 



When Treasury Stock is sold, the total amount received from such sale should 



be credited to the Treasury Stock account. Although it is not incorrect to charge 



the par value of this purchase to Capital Stock, it is a procedure not to be 



recommended. 



In case the organization is not a corporation, but a partnership, sole ownership, or 

 association, the Capital Stock account would be replaced by accounts indicating the 

 ownership, membership, or amount of certificate of indebtedness outstanding. 



