Investment Queries (Business Start-up)

Hello,

We are 3 partners who started a new business on 1st Oct 2016. Each partner contributed 15,000 to the business, but not as cash, but for various start-up costs such as Trade License, Website development, 1st 3 months office rent, printed materials, etc.

What is the correct way to show the contribution of different partners. Also, what is the correct way to allocate these expenses.

How to account future contributions for similar expenses?

Expense claims would be a good way to enter these contributions. Read this Guide:

Because you are partners, you need capital accounts. Read this Guide:

For these transactions, the two topics are closely related.

That depends on your chart of accounts. There may also be local regulations to consider as far as what is capitalized versus what is expensed. Consult a local accountant.

So, what I did now is pass the following entry:

Dr Expenses Acct.
Cr. Capital Account

I was told by some one that i needed to pass the following entry before the entry i passed above, I did not pass the
Dr Cash Account
Cr. Capital Account

Can this be correct?

Did you use Expenses Claims to take up the “Dr Expenses Acct” or some other method.

As you stated above “but not as cash”, therefore that second entry is not required.

I have allocated the investment into various types of Expenses in the COA, for example, Office Expenses, Printing & Stationery, Visa expenses & also as a Drawing by one of the other partners.

I passed the entry as a JV and not by expense claims. Basically, the investment was to carry out various start up costs.

Obviously these expenses were paid by cash, but i just thought of skipping one entry. Will this effect any of my reports in any way? Is this correct?

They were paid by cash by individuals, they weren’t paid by cash by the business. Therefore you aren’t skipping one entry as there isn’t an entry to skip. Your JV is all that is required.

Thanks for the clarification.