Answers · Bookkeeping
How Should Owner Contributions Be Recorded?
Owner contributions generally increase equity or capital, not revenue; a bona fide owner loan is a liability instead.
How it works
The rule, and what it turns on.
The equity account depends on entity type. Documentation should distinguish debt from equity.
Example
Owner deposits $20,000 personal cash: debit Cash and credit Owner/Shareholder Contribution if equity.
Common mistakes
What we see go wrong, and what we do instead.
- Posting contributions as sales.
- Calling advances loans without repayment terms.
A better approach
- Use a signed note if bona fide debt is intended.
Authority
Where this comes from, so you can check it.
IRC §6001; Treas. Reg. §1.6001-1; IRS Publication 583; IRS Small Business Recordkeeping guidance.
Educational information, not individualized tax advice. Treatment depends on your facts, entity classification and tax year, and IRS instructions change. Confirm your own position with us before relying on it. Mint Associates does not provide legal services.
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