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BK-CPA
BK-CPA, Certified Public Accountant (CPA)
Category: Tax
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Experience:  Owner of a CPA firm
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How do I setup quickbooks to purchase shares from my newly

Customer Question

How do I setup quickbooks to purchase shares from my newly formed company (s-corp). Let's say there are 1000 shares and I want to purchase 500 of them at $.10 each. How do I add the shares to quickbooks and how do I deposit the $50 ($.10x500) so it shows up as an equity purchase and not a customer purchase? Thanks much
Submitted: 4 years ago.
Category: Tax
Expert:  BK-CPA replied 4 years ago.

Owners of LLC's are called members, and have members' equity accounts. Owners of corporations are shareholders, and have capital stock (recorded at par value) and additional paid in capital (stock purchases in excess of par value) accounts, generally speaking. I say this to start because you can be an LLC and still be taxed as an S-Corp, so technically you could use either form of accounting at this point as far as I can tell.

 

The debit goes to cash while the credit goes to member's equity or capital stock and additional paid in capital, as applicable. For example:

 

Debit "Cash" for $50

Credit "Capital Stock" for $50

 

Do this using a standard journal entry (no customer is needed for this). If you paid $100, the entry might look like this:

 

Debit "Cash" for $100

Credit "Capital Stock" for $50

Credit "Additional Paid In Capital" for $50

 

If you don't typically make journal entries, in 2009 QB and others, you can go to the top of your screen and click on "Accountant" ----> "Make General Journal Entries"

 

 

Customer: replied 4 years ago.
OK, I am a newbie for QB. I have no cash in my Chart...So I used my bank account instead. Is this OK. Now the other issue is that I always get confused on the credit/debit ... Should it not be Credit $100 and Debit stock of $100?
Expert:  BK-CPA replied 4 years ago.

"Cash" and "Checking," or even "Fifth Bank of Makebelieve," all work fine and are interchangeable. Whatever works for you is best, XXXXX XXXXX as you realize that the account is an asset account used to keep track of cash.

 

Here is the basic accounting equation (all software uses this):

 

Assets = Liabilities + Equity

 

Notice that assets are on the left. Debit actually means "left," where debits increase asset accounts and credits decrease them.

 

The opposite is true for liabilities and equity. Credits (credit means "right") increase equity and liability accounts. Debits decrease these accounts.

 

The other two account types, revenue and expenses, are actually equity accounts that are simply closed to equity yearly. All of your accounts will be classified as assets, liabilities, equity, revenues, or expenses, so now you have the information to think through your debits and credits to an extent.

 

I hope this was helpful. Thank you for your question.

BK-CPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 794
Experience: Owner of a CPA firm
BK-CPA and other Tax Specialists are ready to help you
Customer: replied 4 years ago.
Thanks for the info. I believe that it all worked in QB. I understand complex IT systems and networks; but, the simplest accounting methods tweak my brain.
I like this method of resolution, a simple payment method and answers await in a short time. I will use this service again!!!
Expert:  BK-CPA replied 4 years ago.
Thank you for your question. (Don't hit accept again, as I believe that may charge you for another question?... I'm sending this as a 'need info' request to prevent that).

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