Posting Capital account (equity) as in negative (account receivable))

1

Hi,
I am new to this application and so far this forum and the Guideline have been so helpful. I have one question that is still has not resolved yet from what I have read and learnt through this forum and guidelines.

In my country regulation, for company, needs to deposit a capital in the company account, if you don’t have enough fund yet you can post it in your book as debt/account receivable. So later if we use money from our pocket to pay expenses for the business it can be deducted into the Capital fund contributed account.

My question is, where can we post this account receivable capital in this Manager, I tried to put it in Journal entries it did not match the GL as AR, I put it in Capital account as Amount to Pay, it also did not match the GL as AR.

So, can anyone help me with this? The point is the starting statement of this capital is negative as debt, and later on the amount can be less when there is expenses credited into the accounts.

Thank you for the supports.

2

This is a loan or liability not an Account Receivable

You need to receive the amount in a bank account and post it to the Capital Account.

Then you need to pay it out as a loan

3

You have two subjects combined in this topic. @Joe91 has answered the one about capital accounts. But you also mentioned paying expenses from your own pocket. For that, read the Guide about expense claims: Use expense claims | Manager.

4

As I understood, the whole situation is a legal requirement that the owners should be liable to refund any capital deficiency.

Assuming my understanding is correct, your problem is just a presentation / classification issue when issuing statutory reports to the governments and can be solved by a single journal entry to reclassify any deficit.

In that case, you should create a Balance Sheet Account called capital deficit receivable from owner or whatever name used by convention in your country.

You can keep recording transactions as usual without minding the equity balance.

When it’s time to issue your statutory reports you can create a journal entry to adjust your equity to the adequate levels.

5

Yes. This is what I meant, capital deficit receivable. However, where in the Manager I can post this, and also later on I can put the owner expenses to deduct the capital deficit in the book?

6

I tried to make Journal entries to deduct the deficit by using clearing expenses (from owner), I put Capital deficit in Debit and Capital account in Credit, however the result is the Capital deficit is getting increase instead of decreasing…

7

Yes because the capital deficit is already a Debit balance, and adding a Debit to it only increases it and creates a liability to the business and not the owners. This is opposite to the intended end result.

What you want is this:

Dr. Receivable from owner
     Cr. Equity account involved (Reserve, Owners drawings ... etc.)
8

Is that how to put in the journal entries to clear the expense?

9

See, I create account in Current Asset for Capital Deficit. And after that I create Journal entries to book this capital (supposedly deficit) and put into the current asset capital deficit…
Now, I need to decrease the deficit using the expenses amount… That’s is my initial problem… Could you please explain this to me how to put it in Manager?

This is how I entry on Journal to clear expenses and meant to deduct the capital deficit

image
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10

You do not use a journal entry for this - use an expense claim

Read these
Set up expense claim payers | Manager
Use expense claims | Manager

11

Yes, I have read the guidelines. My problem is not about posting related to expenses. It is just like @Ealfardan mentioned on the above. I am just confused where to put this capital deficit account in the beginning and then the deficit amount will be deducted from the expenses, so the deficit decreasing.

Sorry if I am confusing you guys, but I have been on and off trying to figure this out using Manager. If it is using excel spread sheet, the Capital deficit will be put as Debit and the Equity as Credit.

12

Post a screen image of your chart of accounts

13

The Capital Deficit Account represents money you owe the business

You purchase something for the business using your personal money - this is an expense of the business and reduces the amount you owe the business

Normally, you would record this as reducing your Capital Account using an expense claim.

You then enter a journal entry
DR Capital account
CR Capital Deficit account

14

Part true, @elgertrading should use the expense claim to record the expense but that particular claim will never be paid back.

In order to offset the expense claim against the deficit, @elgertrading will have to do something extra.

And since we agreed that this is better handled periodically, a journal will be used to do the following:

  1. Close expense claims payable to Capital as follows
Dr. Expense Claims (reduction)
    Cr. Some equity account (increase)
  1. Transfer any Capital deficit to receivable as explained earlier
Dr. Receivable from owner (increase)
    Cr. Some equity account (increase)

; or

  1. In case the equity is much more than legally required, some of the receivable can be written off against the Capital surplus as follows
Dr. Some equity account (reduction of surplus)
    Cr. Receivable from owner (reduction)

Nothing special in manager, you will do all of the no-cash, no invoice transactions using journals.

You’re just a bit confused with all the Debits and Credits and could probably use an accountant.

Correction
As @Joe91 suggested, you don’t have to transfer expense claim if you are using capital accounts as expense payers.

15

Expense claim posted to capital owners are not normally paid out but are posted directly to their capital account - there is no liability on the Balance Sheet unlike an employee expense claim, which does give rise to a liability on the Balance Sheet

1 Like
16

Yes, agreed and understood with this. I also understood what @Ealfardan explained on the above, yes my problem is how, what or where to put in Debits or Credits for this one thing…
So basically, I only need to use JE for this no cash transaction.

I have used @Ealfardan 1st way, and now to transfer the capital deficit to receivable, is this Account Receivable account on Asset in Manager? Or should I create new account under Asset?

We are only small business, and even the finance person do not understand using this software as she only used to use excel spreadsheet which is too time consuming…

17

And we are also have asset to put as fixed capital, I also put this using JE with Office asset (Debits) and Capital (Credits)… I also wonder if this is even correct…

18

Do not use that, either create a normal balance sheet account or use special accounts under a custom control account like @Joe91 has suggested.

Either way, don’t use the built-in receivable account because it’s reserved for customers only.

19

It depends.

If you do it this way, you opt out from benefiting from the features built into manager.

However, if you want to fully utilize the features of manager, then you need to take the time and read the guides.

I suggest you continue using it the simple way, create a test business to test what you learn from the guides and when you’re ready, you can make the jump.

20

But how can I make this then, there is no option for source of account to receive or to use money/fund from?