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Share capital authorization belongs in a dated, class-level equity analysis. Authorization is the legal ceiling for each share class. A share register should show authorized, issued, treasury, and outstanding quantities in separate columns because only issued shares enter the accounting records.
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If a charter authorizes 5,000,000 common shares and the entity issues 1,200,000, the unused capacity is 3,800,000 shares. That capacity has no journal entry and adds no dollars to equity.
Review share capital authorization against issued shares. Reconcile share capital authorization to common stock, the dated share capital authorization evidence, and its final presentation.
The share capital authorization record ties issued shares to its source date, measured amount, and common stock effect.
Keep the boundary clear
A board approval or charter amendment may change the ceiling, but an accountant should use supplied legal records rather than decide whether an issue was legally valid.
Authority
Read ASC 505-10-50-2 for changes in equity and share counts.
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- Equity — Understand
To apply this concept: Required. This prior idea supplies the quantities or classification needed for the current analysis.
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- Issued shares — Apply
Required level here: apply. Required. This prior idea supplies the quantities or classification needed for the current analysis.