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Anonymous
November 4, 2022
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How do you categorize capital contributions to subsidiary company?

  • November 4, 2022
  • 1 reply
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I'm setting up the accounting for a parent company that wholly owns a subsidiary company. How do you categorize the capital contributions on the parent company's books when it funds the subsidiary company?

Best answer by Rainflurry

@2040735 

 

Create an other asset account called 'Investment in <Subsidiary Name>'.  Then, when you record the investment, assign that account to the payment.  This reduces your cash and increases the amount in the newly-created investment asset account.

1 reply

Rainflurry
RainflurryAnswer
November 4, 2022

@2040735 

 

Create an other asset account called 'Investment in <Subsidiary Name>'.  Then, when you record the investment, assign that account to the payment.  This reduces your cash and increases the amount in the newly-created investment asset account.

J
jdsharp21
April 5, 2023

Follow-up question...how do you categorize distributions that the subsidiary makes to the parent company?  I am thinking from the POV of the subsidiary it would booked as an owner draw? or maybe a dividend payment?  I'm also unclear how to categorize the distributions from the POV of the parent company.

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