Capital - financial resources allocated by the enterprise in circulation for the purpose of subsequent income generation. The life of any commercial company must be provided with financial resources. The additional capital of the organization is one form of such resources. It will be discussed about him in our article.
Extra capital. What is it?
There is no clear definition of this concept in accounting legislation. As an accounting object, it arose to reflect the various processes of inflation and deflation. You can understand what additional capital is by listing the areas through which it develops. We will consider them a little later.
Confidently about additional capital, we can say the following - this is one of the important parts of the organization’s own financial resources. He acts as a separate, separate part in the aggregate of the total capital of the company and directly affects the economic results, including taxation.
Additional paid-in capital is the active part of the organization’s cash. What to include in its composition and how to distribute funds further, only the owners of the company decide. In the process of activity of any organization there is a consistent turnover of additional capital. He changes his monetary form to material, turning into goods and services, then again turns into money, which are ready to start the next circuit.
The composition of the capital of the organization
To better understand what additional capital is, it is worth considering the concept of capital in more detail. In accounting, this word means the economic totality of own and borrowed (attracted) monetary property necessary for the implementation of the organization.
Attracted capital means loans, loans and debt. In other words, these are obligations that arose to legal entities and citizens.
Equity consists of several components: retained earnings, authorized, reserve and additional capital. All of them are directly related. Additional capital interacts with each of them; a number of standard transactions are provided to reflect movements between these funds.
Authorized capital
Authorized capital is the funds originally contributed by the owners to support the organization. In other words, this is the minimum amount of money necessary for the functioning of the enterprise.
If the owner is not one person, but several, then the amount of the authorized capital can be divided into shares, while the size of this share for each participant is determined as a percentage of the total capital. In the case when the owner, on his own initiative, leaves the founders of the enterprise, he is entitled to demand his percentage of the funds contributed to the authorized capital in cash.
Accounting is carried out on a passive 80 account "Authorized capital".
Reserve capital
Reserve capital is a fund created to cover all kinds of losses in carrying out business activities. It is formed by deductions from net profit (from 5% and above). Its value is directly dependent on the financial results of the company and on the decision of the founders on the issue of its distribution. The size of the reserve fund may change annually, since it takes a long time to form. Its value should be not less than 15% of the authorized capital.
Mandatory reserve fund can be formed only in joint stock companies. In LLC, the formation of a reserve is voluntary.
To account for it, a passive account 82 is provided.
retained earnings
Profit, which is re-invested in the activities of the company, and does not go to pay taxes and other payments to shareholders, is called undistributed.
The main purpose of net profit is that it acts as the source of the formation of the main income of the business owner. The organization has the right every quarter, every six months or annually to distribute the resulting net profit among all participants in a commercial company.
Accounting is carried out on account 84.
Formation of additional capital
So, we will consider due to what the additional fund is formed. To create it, you can not use funds from commercial activities. As a rule, it is formed due to "random" incomes that cannot be planned, but can be foreseen. The following is a standard list of sources:
- increase in the value of assets called non-current, as a result of their revaluation;
- proceeds from the sale of shares at a price that may exceed the nominal;
- increase in assets upon receipt of gratuitous funds and property;
- foreign exchange differences received from deposits of foreign investors.
Origin of surplus capital
For the enterprise to work, it must have sufficient cash, the so-called start-up capital.
Its size is usually indicated in the constituent documents, the distribution is documented. Such capital is called charter capital.
With any change, the organization must amend the paper accordingly, which in practice is not entirely convenient. It is for this reason that the need arose to create additional capital.
Supplementary capital can rightfully be considered the “lion's share” of the organization’s own capital. In other words, this is additional or added capital. If it were not for the obligation to show absolutely all the records related to the movement of equity on an 80 account, then perhaps there would have been no need to create an account “Additional paid-in capital”. Therefore, its origin 83 account is obliged to the authorized capital.
Currently 83 score It is, as it were, supplementary to the 80 account, which governs the corresponding capital change records. In general, we can say that the authorized and additional capital complement each other.
Depending on the decision made at the meeting of shareholders, the company has the right to change the original size of the authorized capital in one of the following ways:
- increase in the value of shares issued;
- additional issue of its shares.
The instruction that is used when applying the Chart of Accounts allows you to reflect similar operations on the additional capital account.
Additional capital accounting
Additional capital is recorded in the same account 83. This account is passive, balance sheet. On the credit side, education or replenishment of capital is shown, and on debit are reflected:
- funds allocated for the growth of authorized capital;
- the amounts that are distributed between the various founders of the enterprise;
- identified differences in the decrease in the value of non-current assets.
All these amounts are reflected in the context of sub-accounts, each of which can be open for a new direction of use. Let us consider in more detail ways to account for this. type of capital and standard wiring.
Accounting for capital gains
With the growth of the fund, appropriate accounting entries are made, reflected in the accounts of accounting:
- Debit 01 / Credit 83 - an increase in additional capital arising as a result of an increase in the market value of any property, an increase from a revaluation of the library stock or the acquisition of literature.
- Debit 02 / Credit 83 - capital growth after revaluation of the amount of depreciation on fixed assets.
- Debit 50.51 / Credit 83 - profit received from the issue of securities (through the cash desk or by bank transfer).
- Debit 75 / Credit 83 - the reflected amounts of the positive difference in exchange rates that arose during the formation of the initial fund.
Accounting for the decrease in additional paid-in capital
Distribution or devaluation of additional paid-in capital is also a fairly common occurrence. If revaluation of property is shown on the credit of the account, then the markdown should be shown on debit 83 of the account.
- Debit 83 / Credit 01 - decrease in the cost of capital due to revaluation of property.
- Debit 83 / Credit 02 - markdown of own fixed assets due to accrued depreciation.
- Debit 83 / Credit 75 - distribution of funds between the co-founders.
- Debit 83 / Credit 75 - reflected in the accounting for negative exchange rate differences (applies to deposits in foreign currency).
- Debit 83 / Credit 80 - the withdrawal of part of the funds in favor of the authorized capital.
- Debit 83 / Credit 84 - decrease in the additional fund as a result of disposal or write-off of any asset.
Change in additional capital during the reorganization of the company
Sometimes it happens that the company accepts the issue of reorganization and the reasonable question arises of the redistribution of additional capital. As a rule, when transforming, joining or merging organizations, difficulties should not arise.
During the transformation of society, funds remain unchanged, and upon merger and merger, they simply add up.
When reorganizing in the form of division and spin-off, usually an equivalent exchange of shares of the company occurs, divided into shares of those companies that were created as a result of the division / spin-off.
Reflection of additional paid-in capital in financial statements
All information on the presence and movement of additional paid-in capital can be seen in the special reporting form No. 3, which is called “Statement of changes in equity”, which is an appendix to forms 1 and 2 of the final reporting of the enterprise.
This report reflects the growth and decrease of each item of equity, including additional. The document contains 3 sections:
- capital flow information;
- information on the adjustment of capital due to errors or changes in accounting policies;
- information on the value of net assets to determine their liquidity.
Additional capital - asset or liability balance? Dealing with this is not so difficult. A separate line of the same name 1350 “Additional paid-in capital (without revaluation)” is provided for in the balance sheet. It is located in the Capital and reserves section, and its data corresponds to the credit balance on account 83, net of revaluation amounts.
