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Abdullah1437
December 5, 2023
Question

Investment account treatment

  • December 5, 2023
  • 1 reply
  • 0 views

Hello everyone,

I require assistance with the adjustment and treatment of investment funds in QuickBooks Online. Let's say you've invested $25,000 into your company, and the funds have been deposited directly into your bank account. To reflect this in QuickBooks, you should add it to both the bank and capital contributions.

Now, let's address spending from this investment. Suppose you use $500 for operating expenses. In QuickBooks, the journal entry would increase the expenses and decrease the bank balance. The question arises: should this expenditure also be deducted from the investment account, considering it's spent from the initial investment? If so, how should this be handled in QuickBooks Online?

I appreciate any guidance on the proper treatment of this transaction in QuickBooks Online.

1 reply

Rainflurry
Rainflurry
December 6, 2023

@Abdullah1437  

 

"The question arises: should this expenditure also be deducted from the investment account, considering it's spent from the initial investment?"

 

No, you don't need to adjust your $25,000 equity contribution.  QB (and any double-entry accounting system) is doing that for you.  In your example, if you contribute $25,000 to your business and you just have a single $500 expense transaction, then your net income is -$500.  That -$500 in net income is reducing your total equity in the business down to $24,500.  If you look at the equity section of your balance sheet, you will see your $25,000 in Owner's Capital (if a sole proprietorship) and a -$500 in net income for total equity of $24,500.   

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