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30 December, 14:20

What is the account that shows the difference between the stock's par value and what new stockholders paid when they bought newly issued shares?

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  1. 30 December, 15:14
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    Share Premium Account that shows the difference between the stock's par value and what new stockholders paid when they bought newly issued shares.

    Explanation:

    Share premium has been the difference between the nominal value of shares of an undertaking and the total number that the undertaking receives for shares issued recently.

    For example, Company ABC has released 300 shareholdings.

    The stock is given a par value or is worth $10, but $15 is paid out per share.

    So the company's debt is $4,500. The share capital is just $3,000 of that $4,500. The leftover $1,500 is an equity premium, which is a reward for partial company ownership for funds raised by shareholders. In the equity premium account, $1,500 is reported on the balance sheet for the corporation.
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