Shareholder Distributions

ksnives · ‎August 26, 2020

Hello! This is my first time posting in the Community!

I manage the bookkeeping for two separate companies--one is a construction company, the other a machine shop. The construction company is 20 years old and provided the start-up funds to get the machine shop rolling. The construction company also purchased ALL of the equipment for the machine shop. I assume this needs to be added to the machine shop as an equity investment (debit fixed assets / credit opening equity).

My dilemma is that I am unsure of how to process the transaction in the construction company account. I already have the expenses of the machinery added to the construction company books.

Please help :)

john-pero · ‎August 26, 2020

Strange, I know I posted a reply before

You mentioned Shareholders, does this mean both companies are corporations?

Who owns the machinery? Which company is insuring it AND taking depreciation? The construction company could lease the equipment to the machine shop , or you could treat the money as loans if it is intended to be paid back regardless of profits.

Is the construction company taking am equity stake in the machine shop and expecting a tax return from it?

If the Assets are to be property of the machine shop then it should not be an expense of the construction company unless it is a billable expense to the machine shop. Asset are not normally expenses

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