How to Book Early Exercised Stock Options Journal Entry

The early exercise of stock options allows the option holder to purchase shares prior to the vesting period. Typically, stock that is purchased via early exercise is subject to repurchase if the holder does not meet the vesting criteria when an event like employee separation occurs.
The entry to record an early exercise is as follows. In this example, the employee is early exercising 1000 options at a strike price of $2.

Debit: Cash $2,000
Credit: Early Exercise Liability $2,000

The early exercise liability is amortized into Stockholder's Equity as the original options vest.