Accounting entries for shareholders' capital increase
Borrow: paid-in capital
Loan: long-term equity investment
Borrow: capital reserve
Loan: long-term equity investment
What is capital reserve?
Capital reserve belongs to the category of capital and is obtained from different sources and enjoyed by all owners. Capital reserve refers to the capital invested by investors or others, whose ownership belongs to investors, and the amount to be invested exceeds the statutory capital. The capitalization of capital reserve shall be calculated according to the proportion of the capital contribution of each shareholder to the paid-in capital, so as to increase the capital contribution of each shareholder.
What is paid-in capital?
Paid-in capital refers to all kinds of property invested by investors as capital, which is the source of all legal capital registered by enterprises, and it embodies the basic property right relationship between owners and enterprises. The proportion of paid-in capital is the main basis for enterprises to distribute profits or dividends to investors. China's "Regulations on the Administration of Enterprise Legal Person Registration" stipulates that unless otherwise stipulated by the state, the paid-in capital of an enterprise shall be consistent with the registered capital.
What is long-term equity investment?
Long-term equity investment refers to obtaining the shares of the invested unit through investment. An enterprise's equity investment in other units is usually regarded as long-term holding, controlling the investee through equity investment, exerting a significant influence on the investee, or establishing a close relationship with the investee to spread business risks.