Investors make capital contributions when a company issues equity shares based on the amount of additional paid-in capital shown alongside the balance sheet entry for additional paid-in capital. Additional paid-in capital is included in shareholder equity and can arise from issuing either preferred stock or common stock. The amount of additional paid-in capital is based on the difference between the price of the security and the par value. Total operating expenses adjusted to exclude depreciation and interest on long-term debt can also be adjusted for a journal entry.
The record made of an accounting transaction to a ledger is known as a journal entry. Journal entries can be used to record the acquisition of land and a building by issuing common stock. In this case, the purchase of land and a building would be recorded in the company’s journal entry as an increase in the company’s assets, such as cash, inventory, equipment, and investments. The journal entry would also include a decrease in the amount of the company’s equity, such as common stock or preferred stock.
When a company issues stock, the journal entry will include the proceeds from the sale of the stock, as well as the value of the stock. For example, if a company issues 10,000 shares of common stock with a par value of $1.00 per share, the journal entry would include the proceeds of $10,000 for the sale of the stock, as well as the value of the stock which would be $10,000.