USA Owner contribution in business

[zohaib0330]

Hi, I just wanted to confirm a few things. Please correct me if i am wrong. If the owner has contributed cash for some business expenses. The first entry would be as follows (in the company accounts) :

Dr Expense account

Cr Owner equity (owner reimbursement)



When the owner is reimbursed:

Dr Owner equity (owner reimbursement)

Cr Cash

I will really appreciate some help. Thanks.

 

[bklynboy]

I have it different - same result but better trail IMO.

Record contribution
Dr Cash
Cr Owner Equity

Record Expense payment
Dr Expense
Cr Cash

 

[zohaib0330]

I have it different - same result but better trail IMO.

Record contribution
Dr Cash
Cr Owner Equity

Record Expense payment
Dr Expense
Cr Cash

Thanks for replying. Will we not Debit the owner's equity account to decrease it by the amount reimbursed to the owner?

 

[bklynboy]

Yes - if a withdrawal then debit the account since money is leaving - this assumes owner is adding funds to business to cover expenses initially and that its needed to fund the business. If you are asking if owner pays from own funds and then is reimbursed what is the entry - meaning owner is not adding to value of business but temporarily covering the expense out of pocket? If so its simply

Record Expense
Debit Expense
Credit Payable to owner

Reimburse owner
Debit Payable to owner
Credit Cash

In this instance there is no change to owners equity but rather a payable set up to him/her until the business can generate the cash to reimburse. Accounting will depend on intent and resolutions that are in place when the cash is contributed (should have some legal document showing whether its a loan to business or a contribution)

 

[zohaib0330]

Yes - if a withdrawal then debit the account since money is leaving - this assumes owner is adding funds to business to cover expenses initially and that its needed to fund the business. If you are asking if owner pays from own funds and then is reimbursed what is the entry - meaning owner is not adding to value of business but temporarily covering the expense out of pocket? If so its simply

Record Expense
Debit Expense
Credit Payable to owner

Reimburse owner
Debit Payable to owner
Credit Cash

In this instance there is no change to owners equity but rather a payable set up to him/her until the business can generate the cash to reimburse. Accounting will depend on intent and resolutions that are in place when the cash is contributed (should have some legal document showing whether its a loan to business or a contribution)

Okay Thanks so much for your time and help! I appreciate it ! =)