How do you categorize capital contributions to subsidiary company?

Anonymous · ‎November 04, 2022

I'm setting up the accounting for a parent company that wholly owns a subsidiary company. How do you categorize the capital contributions on the parent company's books when it funds the subsidiary company?

Rainflurry · ‎November 04, 2022

@Anonymous

Create an other asset account called 'Investment in <Subsidiary Name>'. Then, when you record the investment, assign that account to the payment. This reduces your cash and increases the amount in the newly-created investment asset account.

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Rainflurry · ‎November 04, 2022

@Anonymous

Create an other asset account called 'Investment in <Subsidiary Name>'. Then, when you record the investment, assign that account to the payment. This reduces your cash and increases the amount in the newly-created investment asset account.

jdsharp21 · ‎April 05, 2023

Follow-up question...how do you categorize distributions that the subsidiary makes to the parent company? I am thinking from the POV of the subsidiary it would booked as an owner draw? or maybe a dividend payment? I'm also unclear how to categorize the distributions from the POV of the parent company.

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How do you categorize capital contributions to subsidiary company?