Sale of Common Stock Journal Entry

Overview

Selling the common stock is one of the funding sources that the company may use to operate or expend the business. Likewise, the company needs to make the sale of common stock journal entry when such transactions occur.

The sale transaction of the common stock will result in the increase of total assets in form of cash inflow and the increase in total equity as the number of issued stock will increase together with the amount of additional paid-in capital (if any).

Sale of common stock journal entry

If the company sells the common stock at the price of its par value or stated value, it can make the journal entry by debiting the cash account and crediting the common stock account.

Account	Debit	Credit
Cash	000
Common stock		000

However, the common stock is usually sold at a price that is higher than its par value or stated value. Hence, the journal entry for the sale of common stock usually also includes the additional paid-in capital account for the difference between the par value and the selling price.

In this case, the company can make the sale of common stock journal entry by debiting the cash account and crediting the common stock account and additional paid-in capital account.

Account	Debit	Credit
Cash	000
Common stock		000
Additional paid-in capital		000

Sale of common stock example

For example, on January 01, the company ABC sells 10,000 shares of its common stock at the price of 10$ per share. The common stock has a par value of $1 per share.

In this case, the company ABC can make the journal entry for the sale of common stock as below:

Account	Debit	Credit
Cash	100,000
Common stock		10,000
Additional paid-in capital		90,000

Additional paid-in capital of $90,000 comes from the of selling price of $100,000 (100,000 x $10) minus the $10,000 (which is the par value of $1 multiply with 100,000 shares).

In this journal entry, both total assets and total equity increase by $100,000 on the balance sheet of the company ABC.