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Stock Subscription Accounting
Stock Subscription Overview
Stock subscriptions allow investors or employees to pay in a consistent amount over time and receive shares of stock in exchange. When such an arrangement occurs, a receivable is set up for the full amount expected, with an offset to a common stock subscription account and the Additional Paid-in Capital account (for the par value of the subscribed shares). When the cash is collected and the stock is issued, the funds are deducted from these accounts and shifted to the standard common stock account.
Stock Subscription Example
The Slo-Mo Molasses Company sets up a stock subscription system for its employees and they choose to purchase 10,000 shares of common stock with a par value of $1 for a total of $50,000. The entry is:
| Debit | Credit | |
| Stock subscriptions receivable | 50,000 | |
| Common stock subscribed | 40,000 | |
| Additional paid-in capital | 10,000 |
When Slo-Mo receives the $50,000 cash payment, it offsets the Stock Subscriptions Receivable account, and shifts funds stored in the Common Stock Subscribed account to the Common Stock account, as noted in the following entry:
| Debit | Credit | |
| Cash | 50,000 | |
| Stock subscriptions receivable | 50,000 | |
| Common stock subscribed | 50,000 | |
| Common stock | 50,000 |
Related Topics
Stock accounting
What are the types of share capital?
What is a capital surplus?
What is capital in excess of par?
What is earned capital?


