S Corporation - Owners Investment

[rsprague86]

Hey there, this is my first year filing an S Corporation.

I am curious as to how I should (properly) report a $1,000 owners investment? Also, is this deductible?

Thanks!

[PatriciaV]

A contribution by the owner of an S-Corp is generally recorded as an increase in Member's Capital. It is not taxable income or a deduction. The accounting entry is an increase (debit) in Cash (Asset) and an increase (credit) in Capital (Equity).

[fline789]

I'm only owner in my Scorp. I purchased a vehicle in May 2017 using my 100% cash. How to record on the balance sheet? Debit Equipment (with less accumulated depreciation) and credit Capital Stock? Is this correct? Any comment would be greatly appreciated.

[PatriciaV]

Yes. If you purchased a vehicle for your business, the transaction on the company's books would be a debit to Vehicles (Fixed Assets) and a credit to Paid in Capital. If additional shares were issued for this contribution, then it would be Capital Stock and not paid-in capital.

[fline789]

My Scorp issues no share. I don't do bookkeeping. I do BD whe. It comes to 1120S and M1,M2, and BS. So this meant only Capital Stock involve? How about Loans from Shareholder? Thank you

[PatriciaV]

If you have a business, you should understand general accounting principals. This is important so your tax return is accurate, plus you can track your business success during the year.

Yes, you can enter the cost of the vehicle under Capital Stock.

This is not a Loan from a Shareholder, unless you deposited cash into the business account and the business purchased the vehicle. If that's the case, you need to calculate interest on the note and repay the loan plus interest out of business profits.

[fline789]

The vehicle I purchased new, 15% is commute, 85% is for business, the cost is $50,000.How much is the cost of this asset that accounted for depreciation expense? Is that $42,500 used to calculate the depreciation?

[PatriciaV]

Actually, the full amount is used to calculate the depreciation expense. Then the business use percentage is applied to that number.

[fline789]

Thank you very much for all your quick responses

[Mikeblum89]

The car is fully depreciated. When we added it to business was a debit to fixed assets and a credit to apic .. we sold the vehicle. I’d there any change to apic ? On the sale we debited cash and credited gain on sale 

[AliciaP1]

No, no change in APIC, because the vehicle is an asset of the business, the gain from the sale will push through to the shareholders appropriately on the Schedule K-1s.  

@Mikeblum89 

[Mikeblum89]

Would there ever be a case where the APIC would be reduced? Obviously we aren't re purchasing shares etc. 

[BrittanyS]

If you are not repurchasing shares then the answer is no.  When new shares are issued for preferred or common shares, the paid-in capital is increased and when shares are repurchased the Paid-in capital is reduced.  

@Mikeblum89