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June 19, 2023
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How to record a owner's non-cash contribution in the form of equity?

  • June 19, 2023
  • 1 reply
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Hello, for a startup multi-member LLC using cash accounting, the initial capital contribution by each member (owner) was both in the form of a cash deposit, and also a non-cash capital contribution consisting of a combination of non-inventory supplies and equipment, where each piece of equipment's fair market value was $250 or less.

 

For the cash contribution component, the bank deposit transaction was assigned to the member's contribution equity account.

 

How would the non-cash capital contribution value be recorded?  These non-cash capital contributions are not considered a loan, have equipment of small enough value (< $250) that I don't there is any sort of fixed asset consideration, and the supplies are consumables which we aren't interested in tracking in inventory.

 

In this case, for each member, would a journal entry be made for the total fair market value of the non-cash contribution and assigned to their respective member's contribution equity account?

Best answer by Rustler

A journal entry will work in this case

debit the expense account for the things donated

credit the partner equity account

1 reply

Rustler
RustlerAnswer
June 19, 2023

A journal entry will work in this case

debit the expense account for the things donated

credit the partner equity account

June 21, 2023

Thanks!