Issued shares – What is it, definition and concept | 2022

Issued shares are the number of shares held by investors valued at their issue prices.

Keep in mind that the issue will be made by adding the nominal value and the issue premium, if any. The latter is a surcharge with which the issuer seeks to cover all or part of the issuance costs.

The shares that are issued are subsequently subscribed by investors and then all or part of their value is disbursed. In the final example we can see a simple accounting process for the issuance, subscription and payment of shares.

Ledger account 190 of shares issued

From an accounting point of view, account 190 “Issued shares or participations” reflects the amount of the shares at their nominal value added to the issue premium, if applicable. For example, we have shares for a face value of 100 plus a premium of 10, in total the value is 110.

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Its movement, regarding the accounting entries and the daily book, is simple. It will appear on the debit when we issue the shares, in a first phase. On the other hand, once they are subscribed, the account is canceled taking it to credit.

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On the other hand, it appears with a negative sign in the current liabilities of the company’s balance sheet, reducing its value. The negative sign serves to indicate that it reduces (not increases) the value of that liability. In this way, you actually reduce the debt.

Difference between issuance, subscription and disbursement

Before we have mentioned that we should not confuse emission with subscription. The first refers to those shares that the issuer puts into circulation, the second to those that investors agree to buy.

There is a concept similar to that of issued shares, the issued capital, which should not be confused with the subscribed capital or the paid-up capital. Regarding the third, there is a rule in Spain and it is that 100% of the premium must be paid and at least 25% of the nominal.

In short, we first issue, then some or all of the subscribed shares are subscribed and paid up. In this way, some payment of these emissions may remain pending, which, in this case, would be included in an account called “Members for unrequited disbursements”.

Example of accounting process of issued shares

Let’s look at an example of shares issued with a company incorporation accounting process. This is perhaps the easiest way to understand it. Let’s look at the statement and the entries first, and then discuss them.

A company is formed by issuing shares worth $11,000. Of this amount, 10,000 correspond to the nominal value (share capital) and 1,000 to the issue premium, which must be added to the first. 100% is subscribed and disbursed, that is, all of them.

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Note that the capital stock and share premium accounts, at the beginning of the process, are expressed with the phrase “pending registration”. This is so because we have not yet registered them in the commercial registry of our country, since this is done at the end.

Issued Shares1 3

The process is very simple and consists of four phases. The first is the issue, the second is the subscription, the third is the disbursement and the fourth is the registration of the share capital and the issue premium (if applicable) in the commercial register.

We see that there are accounts that are cancelled, appearing first in the debit and then in the credit. These are the capital stock or the issue premium, both pending registration, the subscribers of shares and the account of issued shares.

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