How do you record a stock split

Question

How do you record a stock split

Answer 1

Splits do not have to be 2 shares for 1 share.  The splits can be larger 10 for 1 or be in reverse 1 for 10 and be in any ratio.  The holding value for the share holder is the result of the ratio. A $100 stock in a 5 for 1 split will now trade at $20 in the market and the holder will have 5 shares for every 1 held before the split equaling $100.

The accounting answer:

Example: $5 par common 100,000 shares outstanding.  4 for 1 stock split.

Debit the capital common stock account - par $5    $500,000

   Credit the capital common stock account -par $1.25   $500,000

To record issue of 400,000 shares of $1.25 par common in exchange for 100,000 shares of $5 par common in the form of a stock split.

Note: that the value does not change so really it is just a note on the financial statements and is done for accounting purposes in account in case of transactions that may occur in the future.

All the "transaction" does is change the par value and the number of shares outstanding.

Answer 2

At the new price with double the shares. That is the proper way to record it.  

Answer 3

You will get 2 shares for every 1 share you have. So if you originally had 200 shares you will have 100 shares now with the price cut in half.