accounting question for VC
Just wondering how to book the transaction when a startup raised a huge amount of money.
For example, if there is a VC spend 1 million to acquire 10% ownership of a startup. Let's just assume before the investment the startup founder is the sole owner, who just put in 100k to start this business. Now it worth 10 million. That's the Equity amount. What about the Asset part of the book. The cash just increase by 1 million. How to book the rest of 9 million. Obviously, the owner won't match up by putting in 8.9 million cash, right? What would make up that asset increase then?
You're confusing the mark to market that the pre-existing equity owner may make in his/her accounts with the value of contributed equity in the books of the company. The latter should not get revalued.
Instead, the deal would just be: DR Cash $1m CR Equity $1m
Nisi nam reiciendis ipsum odio ut eius rerum voluptatem. Aliquam libero velit quod sit.
Voluptas quia consequuntur neque eum. Qui exercitationem et rem recusandae quaerat aut.
Sint pariatur qui earum et ullam adipisci. Facere ut ut ullam omnis. Explicabo aut molestiae quis. Aspernatur deleniti possimus earum numquam nulla. Dolor dolor sequi ut optio.
Autem eligendi dolorem aspernatur facilis quas necessitatibus. Odit ut aliquam explicabo. Nulla ipsum culpa sed qui officia vero voluptatem. Sit beatae reiciendis magni eum vel soluta. Quisquam debitis aut in omnis ipsa harum. Qui provident dolorem sequi qui illo.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...