When a company issues shares for cash, the bank is debited with the amount received, share capital is credited with the nominal value of the shares, and any excess is credited to the share premium account, as section 610 of the Companies Act 2006 requires. Unpaid amounts, money received before allotment, issue costs and bonus issues each need their own entries, and the ledger should always agree with the statement of capital filed at Companies House.

What is the basic entry for a share issue?

Every share in a limited company must have a fixed nominal value (section 542). Share capital is recorded at that nominal value only. If the shares are issued for more than nominal value, section 610(1) requires a sum equal to the premium to be transferred to the share premium account, whether the shares are paid for in cash or otherwise. Shares must not be allotted at a discount (section 580), so the price can never be below nominal value.

Entry Debit Credit
Cash received Bank
Nominal value of shares issued Called up share capital
Amount received above nominal value Share premium account

The entry belongs in the books when the shares are allotted, not when someone agrees in principle to invest. For the company law steps that come first, see how to allot new shares; for what the premium can later be used for, see the share premium account.

What does that look like with real numbers?

Illustration only. A company allots 1,000 ordinary shares of £1 each to a new investor at £25 per share, and receives £25,000 in full.

Account Debit Credit
Bank £25,000
Called up share capital (1,000 x £1) £1,000
Share premium account (1,000 x £24) £24,000

Legal fees of £1,500 for the issue are then paid. FRS 102 paragraph 22.9 requires transaction costs of an equity transaction to be deducted from equity, and section 610(2) allows the expenses and commission of an issue to be written off against the premium it created. The entry is debit share premium £1,500, credit bank £1,500, leaving share premium of £22,500. The costs do not go through the profit and loss account.

What if the shares have not been paid for?

A private company can allot shares nil paid or partly paid; many companies are formed with subscriber shares that are never actually paid. The unpaid amount is still owed to the company, so it is recorded as an asset: debit called up share capital not paid, credit called up share capital (and share premium if relevant).

The Small Companies Regulations put “Called up share capital not paid” as item A in both balance sheet formats, and allow it either there or within debtors (SI 2008/409, Schedule 1, note (1) on the formats). The notes on the formats also require the amount of allotted share capital and the amount of called up share capital which has been paid up to be shown separately. When the shareholder pays, debit bank and credit called up share capital not paid.

Public companies have a stricter rule. Section 586 says a public company must not allot a share unless at least one quarter of its nominal value and the whole of any premium is paid up. For calls, forfeiture and the wider effects, see partly paid shares.

What if the money arrives before the shares are allotted?

Investors sometimes transfer funds before the board has formally allotted the shares. FRS 102 paragraph 22.7(b) says that if cash is received before the equity instruments are issued and the company cannot be required to repay it, the company recognises the increase in equity to the extent of the consideration received. A common way to show this is a separate “shares to be issued” reserve within equity, transferred to share capital and premium when the allotment is made.

If the money is refundable, for example because the funding round may not complete, it is not equity: credit a liability until the allotment happens. Paragraph 22.7(c) adds that where shares have been subscribed for but neither issued nor paid, no increase in equity is recognised at all.

How is a bonus issue recorded?

A bonus or capitalisation issue gives existing shareholders new shares in proportion to their holdings without them paying anything (FRS 102 paragraph 22.12). It moves amounts between equity accounts and no cash changes hands.

  • From share premium: debit share premium, credit called up share capital. Section 610(3) expressly allows the share premium account to pay up fully paid bonus shares.
  • From retained profits: debit profit and loss reserve, credit called up share capital. Under article 36 of the Model Articles for private companies, the directors can capitalise profits or the share premium account if authorised by an ordinary resolution.

Section 829(2)(a) confirms that an issue of bonus shares is not a distribution for the purposes of the distribution rules. Check the company’s own articles, since many companies have amended or replaced the model wording.

What about shares issued for assets or to settle debts?

Section 582 allows shares and any premium to be paid up in money or money’s worth, including goodwill and know how. The entry is the same shape as a cash issue, with the asset received debited instead of the bank. FRS 102 paragraph 22.8 measures the shares at the fair value of the resources received, net of transaction costs, except where merger relief or group reconstruction relief applies. Where shares are issued to a shareholder to clear a loan they made to the company, paragraph 22.8A can mean no gain or loss arises. The valuation and filing rules are covered in issuing shares for non cash consideration.

How do the books tie to Companies House?

Section 555 requires a return of allotment to be delivered within one month of an allotment, with a statement of capital showing the total number of shares, their aggregate nominal value and the aggregate amount unpaid on them, whether nominal value or premium. Section 554 requires the allotment to be registered in the register of members within two months. Three figures should therefore agree at all times:

  1. the called up share capital account in the ledger, analysed by class;
  2. the latest statement of capital at Companies House;
  3. the register of members.

Any movement in share capital or premium also appears in the statement of changes in equity. Reconciling these at each year end catches most errors before the accounts are filed.

What mistakes come up most often?

  • Crediting the whole receipt to share capital, so share capital no longer matches the statement of capital and the premium is missing.
  • Crediting investment money to the director’s loan account or to sales because nobody told the bookkeeper what the receipt was.
  • Charging issue costs to profit and loss instead of deducting them from equity.
  • Ignoring unpaid subscriber shares, leaving share capital in the books with no matching asset or cash.
  • Recording shares in the wrong class where the company has more than one, which then flows into dividend and voting records.
  • Treating refundable advance subscriptions as equity before the allotment is certain.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.