I am the sole shareholder of an s-corp, QB was set up as a single member LLC and i had a lot of things not set up properly, after months of help from you guys getting things straightened out I went to a CPA and had him file my 1120s. I had him correct some things in Quickbooks but I am a little confused on a couple things and would like a better understanding of my equity accounts so I know what to put where if need be.
I had owners equity account mostly money that I had put into to business
I also had Retained Earnings, Opening Balance Equity and Owners Draw accounts.
Near as I can tell this is what the Accountant did...
-He Created a Common Stock Equity account
-He renamed owners draw to shareholder distributions
-He made a journal entry to zero out owners equity and it appears in common stock as part of a split with the building, land and furniture and equipment.(not sure if I said this right)
-The amount in common stock is the total from assets-liabilities...
What I am trying to do is simplify my chart of accounts and understand equity accounts better, I have read many posts and articles as well as watched hours of youtube videos and everything i see and read seems do be different or they use different names which is where im getting confused.
some say common stock some say capital stock(im guessing these are the same thing)
one guy says make a shareholders capial account and put distributions and contributions as sub accounts, some say you need 3 accounts some say 4 some 5 or even 7...smh... I would like as few as possible
So this is what I have done so far
-I made opening balance equity account inactive as I never used it
-I added shareholder contribution account and moved everything from the previous owners equity account to it as it was mostly money i put into the business
-I renamed Owners Equity to Shareholders capital and made distributions and contributions sub accounts
So I now have 5 equity accounts which looks like this
is shareholder capital the same as common stock ? can i just delete it and put dist. and contrib. sub accounts of common stock or keep it this way or or delete shareholder capital and not have sub accounts ? One video i watched said close distributions and contributions out to retained earnings and leave common stock alone, the accountant will do all this at the end of the year but I would like to understand better what is being done... also there is a lot of mention of additional paid in capital, is this the same as shareholder contributions ?
And last as an example if my building in my asset account had a value of say 150,000 and my loan for the building was from a family member rather than a bank and said loan was in mortgage loan payable account with a balance of say 120,000 and the family member as part of an early inheritance said I only need to pay back 50,000 how would I account for this, does it go in owner contribution and out of mortgage loan payable ? and does it increase my common stock ?
Thank you for any help
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