The journal entry to record the issuance is as following:
Debit Cash $7,000
Credit Common Stock $6,000Credit
Paid-in capital $1,000
A company must record its transaction when they issue their stock to the investors to collect funding for their business operations and investment. When the stock is issued, company receive cash for their business operation and the investors receive some portion of ownership of the company. This issuance of the stock transaction shows that there is an excess of par value. We have to record a different credit account besides of the Common Stock Account called the paid-in capital if there is a difference between the stock's par value and the amount given by the investors for the stock. This term does not show that the company gains benefit from the excess of par, but it shows that the investors contribute an additional amount for the investment.
