How to Record Early Exercise of Stock Options
Records the receipt of cash for the exercise of stock options before they have met vesting requirements.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Cash | Debit | 10,000.00 | - |
| Liability for Early Exercise Stock | Credit | - | 10,000.00 |
💡 Accountant's Note
Cash received for early exercise of non-vested options is recorded as a liability because the shares are subject to a repurchase right by the company until they vest.
Practitioner & Systems Framework
💻 ERP Architecture
Set up a deferred liability account to track these proceeds until they are reclassified to equity upon vesting.
⚠️ Audit Flags
Recording early exercise proceeds directly to equity before vesting has occurred.
📄 Required Documentation
83(b) election copy, early exercise agreement, and proof of cash receipt.
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