Accounting entries for borrowing to increase paid-in capital
Whether the loan can be reinvested or paid-in capital mainly depends on the amount of paid-in capital, which is less than or equal to the relevant registered capital. If the amount after investment exceeds the registered capital, the excess shall be regarded as capital reserve.
Loans cannot be directly used as paid-in capital. If you want to use a loan as paid-in capital, you need to inject capital through a bank account first. Relevant accounting entries are as follows:
Debit: Other receivables.
Loans: bank deposits
The accounting entries for capital injection are as follows:
Debit: bank deposit
Loan: paid-in capital
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. When the paid-in capital of an enterprise increases or decreases by more than 20% compared with the original registered capital, it shall apply to the original registration authority for change registration with the certificate of capital use or capital verification.
What are other receivables?
Other receivables refer to all kinds of receivables and temporary payments except financial assets, notes receivable, accounts receivable, prepayments, dividends receivable, interest receivable, subrogation receivables, reinsurance receivables, reinsurance receivables and long-term receivables.