If you have recently initiated a business capital account, you may be uncertain about how to use it properly. By learning more about this kind of account, you can utilize it to reflect the ownership transactions of your company. Better yet, you might leverage the information from such an account to make informed decisions for your business.
Understanding What a Business Capital Account Is
The first step to learning how to use such an account is to comprehend what, exactly, it is. This type of account is used for both single-member LLCs and partnerships. The account is essentially used to track what each person contributes to the business.
What a Business Capital Account Comprises
The capital account is depicted on the balance sheet for a business. It’s considered an equity account, indicating that it is associated with the business owner. When an owner makes a contribution to the business, it is reflected in the account. Such a contribution may be made at the onset of joining the business, but it can also be made later.
The owner’s portion of the losses for the business should also be tracked via this account. If an owner deducts money from the account, this is counted among the losses.
Making Contributions
To use your business capital account correctly, you need to know what items to record. Capital contributions of property or money, for example, should be included. When you start or join a business, the money you contribute is capital, and it should be recorded. If you make contributions to other assets, such as computer equipment, you can include it in the account. In order to do this, you should value the asset at the time you contribute it to the business. You can also add contributions that you make later, but be sure to speak with your accountant about any restrictions associated with doing this.
A business capital account is an important aspect of a balance sheet. If your business does not have the capital needed to operate, contact Business Financing Corporative today.
