Accounting Question for Startup Business

[JKing]

This is purely an accounting question and really has nothing to do with Peach. My brother recently started up a company. He uses regular Peachtree Accounting. What would the journal entry be for startup "loan"? A standard journal entry for a startup would include debiting the business checking account and crediting a loan account. However, this is all his money and will not be repaid so it is not actually a loan.

Does this have to show up as a loan? Should it? If not, what should the entry be?

Thanks in advance!!

[rmsusa]

If it's not a loan don't record it as a loan. Debit cash credit equity.

[JKing]

Thanks so much!!!

[SStordahl]

Thanks so much!!!


Glad you liked that answer....even if it's completely wrong. Actually, it can be classified as debt or equity. It depends on a lot of circumstances...what kind of entity are we talking about (passthrough, c-corp, etc?). What is the intention of the equity owners....(keep the entity stripped out or show strong participation?). Actually, I generally recommend debt to equity as debt can later be easily converted to paid-in capital if required....not the reverse. But there are other considerations........please provide your billing address and I will discuss this topic in depth.
S, CPA