Hi everyone. Please, I have a situation where a partner is bringing in some inventory items as part of her contribution to the business. When these inventory items are entered as starting balances, the corresponding entry goes to Retained Earnings. Please is there a way I can move it from retained earnings to another Equity account (Capital Contribution) because the inventory items on this instance are not retained earnings but actually capital contribution by the partner.
Thanks so much.
The situation is not clear. Was the business already operating when the new partner joined? Or is it just starting and this is her buy-in?
Whatever the case, starting balances are only used when migrating from a prior accounting system.
Thank you @Tut . The business is a new business however one of the owners is bringing in inventory items which she already has as part of her equity contribution.
That is a contradiction.
If it is a new business partners will be contribution to equity to get the business started. Such transactions would be entered directly into Manager (not starting balance).
If the business was operational with a prior accounting system then starting balances would be entered into Manager which encapsulate the running totals of all prior transactions in the old accounting system.
If it is not clear what is your case you need local accounting support.
A partner can make contributions in kind. Use a journal entry. Debit Inventory on hand for the inventory items and credit the partner’s capital account. In both cases, use the value you have agreed upon for the inventory items. Document the basis of that value in accordance with local regulations. As suggested, you should probably consult a qualified accountant.
Thanks dearly. This solves the problem perfectly.