A nominal legal value per share set in the charter — often $0.0001 for Delaware startups. It has nothing to do with what the shares are worth; it decides how proceeds are split between common stock and APIC.

Is a SAFE recorded the same way?

Under ASC 480 and ASC 815 most post-money SAFEs are classified as liabilities until they convert, so they do not belong in common stock or APIC. The issuance entry here is for priced shares.

Journal entry for issuing common stock

When shares are issued for cash, debit Cash for the proceeds, credit Common stock for the par value of the shares, and credit Additional paid-in capital for everything above par.

Proceeds: $2,500,000
Common stock at par: $200
Additional paid-in capital: $2,499,800
Entity: Illustrative company
Basis: Accrual
Currency: USD
Period: March 2026

The worked example

A Delaware corporation issues 2,000,000 shares of common stock at $1.25 per share, par value $0.0001. Proceeds are $2,500,000: $200 to common stock and $2,499,800 to additional paid-in capital.

Transaction · March 2, 2026

JE-12 Mar 2026Manualposted

Issue the shares for cash.

Journal entry JE-1, 3 lines
Account	Debit	Credit
1000 Cash	2,500,000 US Dollar
3000 Common stock		200 US Dollar
3100 Additional paid-in capital		2,499,800 US Dollar

Totals	2,500,000 US Dollar	2,500,000 US Dollar

Balanced.

What the entries do to the accounts

Every entry above posted to the ledger, starting from zero balances: the net debit or credit each account is left with. Debits equal credits, so the books still balance.

Net movement by account
Account	Debit	Credit
1000 Cash	2,500,000 US Dollar
3000 Common stock		200 US Dollar
3100 Additional paid-in capital		2,499,800 US Dollar

Totals	2,500,000 US Dollar	2,500,000 US Dollar

Why it is booked this way

Cash received for shares is owners' capital, not income. It is split between common stock, at the par value the charter sets, and additional paid-in capital, which holds the rest.

With par at a hundredth of a cent, common stock is a token balance and almost all of the investment sits in APIC. The split matters for the charter and the franchise tax, not for the total equity raised.

Common mistakes

Crediting the whole investment to common stock, so APIC is missing and the par value on the balance sheet is wildly wrong.
Recording the investment as revenue or income.

Questions

What is par value?: A nominal legal value per share set in the charter — often $0.0001 for Delaware startups. It has nothing to do with what the shares are worth; it decides how proceeds are split between common stock and APIC.
Is a SAFE recorded the same way?: Under ASC 480 and ASC 815 most post-money SAFEs are classified as liabilities until they convert, so they do not belong in common stock or APIC. The issuance entry here is for priced shares.

Terms on this page

Work with this entry

The tool that computes the schedule, the concept behind it, the entries that come next and the components that render them.

An illustrative company, not anyone’s real books. Every figure on this page is computed from the inputs in the example and posted by the same functions as the journal entry balancer. General information for US companies under US GAAP, not accounting or tax advice.