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

Bill Menger bmenger at hpcsociety.org
Mon Dec 26 08:21:51 EST 2016


Thanks to all of you; by splitting the 5000 transaction and calling it a loan, I have been able to clear up the imbalance.


On Dec 26, 2016, at 02:04, David T. via gnucash-user <gnucash-user at gnucash.org> wrote:

Buddha,

That’s a good explanation for the OP. I’ll just note that most of what you write here is covered in the first few chapters of the Guide.

Cheers,
David

> On Dec 26, 2016, at 3:56 AM, Buddha Buck <blaisepascal at gmail.com> wrote:
> 
> There are two issues here:
> 1. How to clear out the Imbalance-USD account and get the books reflecting
> what he intended to record; and
> 2. Should the $5000 initial infusion be recorded as coming from equity or
> liability, given that he later took the $5000 back out of the business.
> 
> WIthout being intimately familiar with the laws of the jurisdiction that
> his business is in, I don't think any of us are qualified to answer the
> second question. I encourage the original poster to consult with a local
> accountant. If they say that it should have been treated  as a loan, and
> not as an equity infusion, then ask us how to change it, and we can help.
> 
> But the first question should be a piece of cake -- and is what was asked
> originally.
> 
> Here's my answer:
> 
> You have, in your Chart of Accounts, an account called "Imbalance-USD".
> When you create a Transaction in GnuCash, the transaction is supposed to
> balance -- each transactions is divided into two or more "splits", each of
> which has a debit (left-hand) or credit (right-hand) value, and the sum of
> debits must equal the sum of credits. If you fail to balance the
> transaction, GnuCash will create a split for the Imbalance-USD (or
> Imbalance-GBP, Imbalance-JPY, for whatever currency your transaction is
> imbalanced in) that will balance out the transaction.
> 
> If everything is going right, there should be no transactions listed in the
> Imbalance-USD account. The existence of any transactions listed in that
> account is a sign that those transactions were entered incorrectly.
> 
> So open up the register for the Imbalance-USD account and look at the
> transactions listed there. You can select a transaction, and press the
> "Split" button along the top row of buttons.
> 
> The register line should split up into four or more rows, the top row will
> have the date and the transaction description. The rest of the rows will
> have no Date field, and the bottom row will be completely empty. The
> remaining 2+ rows will show one account and debit/credit for that account,
> per row.
> 
> From this (date, description, and accounts and values) you should be able
> to figure out which transaction was fat-fingered.
> 
> At this point, you can edit the entire transaction -- the accounts, the
> debits, the credits, etc, until the transaction looks like what it should
> be.
> 
> My *guess* would be that the transaction credits Equity:Capital for $5000,
> and debits Imbalance-USD for $5000, when it should credit Equity:Capital
> for $5000 and debit Assets:Checking Account for $5000.
> 
> When you change the Imbalance-USD account to some other account (whatever
> the proper account should be), then the transaction will disappear from the
> Imbalance-USD register.
> 
> Keep fixing transactions in the Imbalance-USD register until they are all
> gone.
> 


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