How do I account for money contributed before bank account opened?

Question

I've basically put in $300 of my own money to Incorporate, purchase initial equipment, etc. Now I have my EIN and a Bank account and bookkeeping software - how do I ensure my owner's equity is appropriately reflected and I'm not actually in the hole?

score 1 · Accepted Answer · answered May 12 '15 at 21:19

The way my accountant had me handle this was to create a liability account in QuickBooks called "Loan from Kyle". I had a few times where I had to deposit money into my business checking account, and I categorized the deposit as this account. Then, on the balance sheet, it's properly displayed as a liability, and it's recorded that the money came from me.

When I eventually wanted to repay myself, I just wrote myself a check and categorized it as "Loan from Kyle", and that liability went away.

score 0 · Answer 2 · answered May 06 '15 at 23:29

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Most bookkeeping software should allow you to reconcile your account. Account reconciliation is what you do in order for you to have matching balances between your paper statements and electronic statements.

answered May 06 '15 at 23:29

Eddie

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score 0 · Answer 3 · answered May 14 '15 at 12:41

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It is very important to clasify the loan as a "loan by XX to company" to distinguish it from a 'loan by company to XX". Owner's or director's loans from company can get into hot tax water, while a 'loan to company' (for startup cash) is easilly sorted out by repayment.

answered May 14 '15 at 12:41

eionmac

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Hi eionmac, welcome to Freelancing! Can you describe how this answer is different from Kyle Slattery's answer above? Right now, it looks like a shortened version, with very little extra information added, creating noise. If you have more information, please [edit] your answer to include it. Thanks! – Canadian Luke May 14 '15 at 17:09

How do I account for money contributed before bank account opened?

3 Answers3