S-Corp: How do I handle initial cash infusion that started the company?

[DaveC49]

Hi,

I think you have made a mistake on the initial transaction for the injection
of the $5000 capital into the company.

If it is not a loan that has to be repaid then the original exchange is
$5000 in cash  for $5000 equity in the business. This transaction should
have the following splits.

                                                     Debit                         
Credi

Asset:Bank:CheckingAccount           5000
Equity:CapitalContributions                                              
5000

Your are showing  ($5000) in the distributions which would not normally
contain any entries unless you have really made a distribution to the
shareholders of the company. i.e. returned money to them (or yourself).  It
may be the Imbalance account is the other half of this split. If this is the
case then simply  deleting the whole transaction should restore things to
order.

In my jurisdiction (Australia) the Distributions account is usually used for
recording distributions of dividends to stockholders in  a publicly listed
company. For a private company, the distribution of profits to the owner is
normally done through an account labelled Drawings. The names are not
critical as long as the meaning is clear to you and your accountant, but it
will make your accounts easier to understand if you are following local
practices and conventions.

If your inital contribution to the business is by way of a loan that has to
be repaid, then the inital transaction would be
                                                    Debit                   
Credit
Asset:Bank:CheckingAccount          5000
Liability:StartupLoan                                                   5000


and you would then make repayments as per any other loan crediting the
Liability:StartupLoan and debiting an expense account  e.g.
Expense:LoanRepayments by the payment amount.


David Cousens



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