Boring Accounting/Finance Question - Balance Sheet Entry

[swede123]

This is not a personal finance question, so I thought this was a better place for it than the finance forum.

Let's suppose you have a newly formed corporate entity, comprised of 10 equal partners. Each partner puts in $150,000 in starting cash, which are used by the corporation to purchase equipment, cover expenses etc. until revenues start coming in.

Now, setting up the balance sheet you have $1,500,000 in cash at the starting point, but where is the balancing liability/equity entry? The $150K per partner is not a loan, so there is no debt involved. Neither is it a stock offering, so there is no stock involved. It seems the remaining option would be to put the $1,5M associated with the initial cash into retained earnings?

Is this correct, or should the entry be in some other category on the liabilities & equity side of the balance sheet? Maybe I'm just being retarded and the corresponding $1.5M HAS to be represented as either either stocks or a loan-commitment?

Thanks,

Swede

[lgas]

There is usually a "paid in capital" account that is a credit account. The balance of this account increases as well as the balance of your cash account.

[swede123]

lgas,

Thanks, that's just what I was looking for. The PIC amount remains the same throughout the years, right? It would only go down if there was some sort of pay-back to the individual partners, correct?

Swede

[ScottieK]

In a partnership, if the partners pony up the money with no expectation of getting paid back, it is called "Paid in Capital" or "Contributions," under the equity portion of the balance sheet. Retained earnings is from cash flow from operations (profit), not from cash flow from EDIT: investments, not financing (contributions from the partners).

If the partners make the same contribution, but expect to get paid back, it is a Notes Payable liability.

EDIT: Yes, any money paid out of the PIC or Contributions account to the partners is called a Distribution.

ScottieK

[sredinator]

Swede
This should be an equity entry but not Retained Earnings, if the owners were issued Stock for this then the entry s/b to Capital Stock, otherwise it sounds like this should be to Contributed Surplus.

Whatever you call it there needs to be a credit to equity of $1.5 million (but not to RE)

[guids]

While we are on the subject of business finances, I have 30 customers, , each day, in quickbooks, I either give them a credit, or give them an invoice (right click on customer name and select create invoice, or create credit memo/refunds.). Now, this balance carries over for 1-2 weeks until I pay them what they are owed, or I collect, when I go to enter the payment, I "receive payments" and I write a check from the account if I pay them. The money never works out though, whenever I receive payments, it always says that they owe me WAY more than they do, but after all is said and done, they do show a 0$ balance in the customer list.

[DeSaganaDiop]

Debit Cash.
Credit Common Shares (or some other type of invested equity)

[deucegame]

[ QUOTE ]
quickbooks

[/ QUOTE ]

sucks. get new software.

but i'd have to look at it more closely to understand your actual problem. pm me if you want me to try to help.