Salaam All,
Im doing a very easy accounting project, but its important to graudation and I am having trouble with one section.
The company issued common stock to pay for pending debt. There is an excess afterwards which my group recorded as a revenue. The prof. is saying that this should be in the paid in capital account.
This is where I get confused. Why? And how is this a revenue recognition problem.
Re: Accountants, Please help
[QUOTE]
*Originally posted by ~MuNiYa~: *
The company issued common stock to pay for pending debt. There is an excess afterwards which my group recorded as a revenue. The prof. is saying that this should be in the paid in capital account.
This is where I get confused. Why? And how is this a revenue recognition problem.
[/QUOTE]
When a company issues an equity instrument (stocks) to pay off debt, it is strictly a balance sheet transaction. There is no way it can be a revenue.
For revenue, the Company must have provided services or sold products/asset (BTW selling fixed assets is 'Other Income' not regular revenue). Settling a liability does not give rise to revenue.
For example, if the debt was $100, and the Company issued equity of $80 to settle it in full, then the accounting transaction will be something like this:
Debt ... $100 DR
Common Stock .......... $80 CR
APIC ...................$20 CR
you are soooo the man!!! 
i was gona tell u wat faisal unkil told u .. may be next time :|
ITS THE THOUGHT THAT COUNTS... THANK YOU WALEED.
Hey I was also thinking (about telling you to ask Fasial) Does the thought still count :p
hmcq... stop shooting the dead in the battlefield after the war is over. That task is strictly reserved for auditors. :-D
hey depends on if they are counting the bullet wounds or the body counts :)