cancel
Showing results for 
Search instead for 
Did you mean: 
Highlighted
Level 1

How to record owner's non-cash contribution for purchased items?

I'm using QB 2015 Premier for an S-corp.  If I purchase an inventory asset (raw material for manufacturing) and don't want the business to pay me for it, then how do I receive the inventory asset and tie it to an increase in the owner equity account?  How do I handle the bill for receiving the asset?

 

 

(Title has been edited by moderator for clarity)

 

4 Comments 4
Highlighted
Level 15

How to record owner's non-cash contribution for purchased items?

There are no owner equity accounts in an s-corp, check with you tax accountant on how shareholder capital should be set up and the restrictions on its use.

 

the value of the items would be donation income, deposit that amount to a cash type bank account, then use the cash bank account to "purchase" the items

Highlighted
Level 1

How to record owner's non-cash contribution for purchased items?

I've seen article after article explaining the owner equity accounts for an s-corp,  the simplest suggesting two accounts: contributions (initial investment and additional paid-in capital) and distributions (cash paid out and reported on Schedule K-1).  It is always mentioned that additional paid-in capital can be cash or non-cash contributions.  The QB site contains instructions on recording cash contributions (which increase both the bank account balance and the owner equity balance), but not non-cash, inventory contributions.  Yours is the first suggestion I have seen that there are no owner equity accounts for an s-corp.  Can you explain any further?

Highlighted
Level 15

How to record owner's non-cash contribution for purchased items?

shareholder capital is the value of the shares of stock you own at par value
additional paid in shareholder capital is the value you paid over and above par value

 

As I understand things, a coproration is a legal entity, it stands alone legally.  Whereas a sole proprietor or partnership is you personally being liable legally.  (LLC adds personal liability protection much like the protection that a corporation does, but that is at the state level)

 

So just like your loaning money to a friend, that is a legal loan, you do not become part of your friend.  He pays you back eventually, and if not then you have civil recourse to sue him.  The corporation acts as the same separate legal entity.

 

This may help

http://loopholelewy.com/loopholelewy/01-tax-basics-for-startups/s-corporations-03-capital-accounts.h...

 

Level 1

How to record owner's non-cash contribution for purchased items?

Rustler, thanks for the additional input and the link (I think I had run across that one also).  Loopholelewy does mention loans, but does not specifically address additional contributions - allowed or not.  A couple of other links that I have looked at are:

http://www.quailoaks.com/s_corp_accounting.htm

https://www.watsoncpagroup.com/kb/s-corp-equity-section_328.html

Near the bottom of the page for the first link they mention adjustments to the owner captial account to reflect additional equity investments.  Right at the top of the page in the second link, you can see they mention Additional Paid-In Capital as one of the four recommended owner equity accounts.  Other places talk about either making a loan to the company (and creating a loan basis for the owner) OR contributing additional capital - indicating that either is an option.

 

It seems that additional contributions, rather than loans, are acceptable, but I should probably heed your initial advice and consult an accounting professional to make sure I get this right.

Need to get in touch?

Contact us