Owner's contribution is liability or equity account?
Tigran Davtyan
tigrand at gmail.com
Fri May 17 15:47:10 EDT 2013
Hello,
I guess I have a basic accounting question that I am trying to solve in
GnuCash.
The small business has two shareholders with equal share split. The last
fiscal year (2012) balance sheet is already available in paper from the
accountant that holds particularly the retained earnings. There is some
amount due to shareholders for their periodic contributions into the
business (say 7000).
What I want to achieve?
Setup GnuCash for bookkeeping, to particularly track each year's
contributions per shareholder as well as each year's retained
eanings/looses for the business.
If I use Liability accounts to track shareholders annual contributions that
works nicely. Ex:
Equity
Opening Balance
Past Retained Earnings
2012
Liability
Shareholder contributions
Shareholder1
2013
2012
Shareholder2
2013
2012
And to start off of the last year balance sheet I will record the following:
Liability:Shareholder contributions:Shareholder1:2012 4000 CR
Equity:Past Retained Earnings:2012 4000 DB
Liability:Shareholder contributions:Shareholder2:2012 3000 CR
Equity:Past Retained Earnings:2012 4000 DB
However as I read thru different sources majority suggests Owners
contribution account to set as Equity account. If that becomes the case how
can I track both the owners contributions for each year as well as retained
earnings if both are equity accounts?
In particular how to start the accounts using the last year balance sheet
where retained earnings is (say) -8000 and owners contribution is say(7000)?
Thanks in advance
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