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Level 8

Capital Stock or Additional Paid-in Capital???

Working on an s-corp balance sheet and I'm not sure if I'm entering Capital Stock and Additional Paid-In Capital correctly. This is for a 2nd year in business.  Let's say the beginning of year balances are (not sure if it matters there was a loss but I'll put it in just in case)...

 

capital stock   $20,000

additional paid-in capital   $0

retained earnings (loss)  -$10,000

 

And this year the two shareholders each put in an additional $5,000 in contributions to equity, not changing their 50/50 split. Should the end of year balance look like THIS (capital stock always staying the same as the first year stock purchased)...

 

capital stock   $20,000

additional paid-in capital   $10,000

 

Or does the capital stock number get increased to $30,000 and I leave add'l paid-in stock at $0? Or something else entirely? 

1 Best answer

Accepted Solutions
Level 8

Capital Stock or Additional Paid-in Capital???

you don't have to do sch L balance sheet if your assets are less than $250k. The contributions increase the capital stock number.....the additional paid-in capital is amounts paid in excess of par value.

3 Replies
Level 8

Capital Stock or Additional Paid-in Capital???

you don't have to do sch L balance sheet if your assets are less than $250k. The contributions increase the capital stock number.....the additional paid-in capital is amounts paid in excess of par value.

Level 8

Capital Stock or Additional Paid-in Capital???

Thanks. The assets are over $250K but I just used these numbers as an example. I'm still confused about what happens to "capital stock" in TurboTax in future years, if distributions are taken. Let's say the third year, the shareholders each take $3000 in distributions. I enter that in the shareholder questionnaire in TurboTax,  and I see it flows through to the balance sheet to automatically get subtracted from retained earnings, so I don't put it on the balance sheet...

 

But what happens the NEXT year?

 

I now have the following on the hypothetical end-of-year on the balance sheets:

Year 1 end  $20,000 capital stock

Year 2 end  $30,000 capital stock (added $10,000 in contributions)

Year 3 end  $30,000 capital stock (the $6000 in distributions get taken out of retained earnings automatically)

 

Now in Year 4, the distributions have been subtracted from retained earnings in the beginning of year retained earnings balance. So does the Year 4 ending balance, assuming no contributions were added, look like this?

 

Year 4 end  $30,000 (still the same)

OR

Year 4 end  $24,000 (tally of initial capital stock + contributions paid in - distributions paid out)

 

I don't know exactly what TurboTax is doing with its calculations. In Quickbooks the shareholder contributions and shareholder distributions get "zeroed out" to retained earnings each January 1st. But having capital stock at zero on the TurboTax balance sheet doesn't seem right?? TurboTax isn't zeroing out the capital stock to retained earnings, it's only putting the distributions in there. So it seems like I should leave the capital stock + contributions and carry it over every year, but never subtract the distributions from that amount in TurboTax? Confused by the different way this is handled in Quickbooks.

Level 8

Capital Stock or Additional Paid-in Capital???

don't know what quickbooks or turbotax calculations are doing but your capital stock should not be changing unless you're issuing shares every year....capital stock is the number of shares issued times the par or stated value....amounts paid above that value = additional paid-in capital.