The Capital Accounts tab is a specialized feature designed to keep track of funds contributed by or distributions made to business owners or investors.
New Capital Account
In the Capital Accounts tab, click New Capital Account to define a member or owner of a capital account:
Then in the form, enter information into the following fields:
- Name is the owner of the capital account.
- Code is optional and can be any alphanumeric entry.
- Starting balance field allows capital account balances to be migrated from prior accounting systems. The dropdown menu allows a choice of whether the capital account owner has Paid in advance (a credit balance) or there is an an Amount to pay by the business (a debit balance).
Click Create button to save.
Each Capital Account you create automatically has the following Capital subaccounts:
- Funds contributed
- Share of profit
Capital subaccounts are useful for segregating movements to and from Capital Accounts. Default sub-accounts are sufficient for most businesses, but you can add, remove or rename subaccounts under the Settings tab by selecting Capital subaccounts:
Drawings tracks money a partner, beneficiary, or member withdraws from the business. When you transfer funds from a bank account to a member, or if the business pays a private expense on behalf of a member, the transaction should be posted to the Drawings sub-account.
Funds contributed tracks money a member has contributed to the business. When a member deposits personal funds into a business account, the transaction should be posted to the Funds contributed sub-account:
Share of profit
Share of profit is used to allocate net profit from Retained earnings to Capital Accounts. Only certain types of legal entities are required to distribute profit to owners. Such distributions are often done by an accountant at the end of a financial period using journal entries.
By default, all capital accounts are combined as Capital Accounts in the Equity section of the Balance Sheet.
Sometimes, it is necessary to rename the account. For example, if the business operates as a sole proprietorship, the account can be renamed as "Owner’s equity".
You can go to Chart of Accounts in the Settings tab:
Click Edit next to Capital Accounts and enter new name into the Name field. Then click Update to save changes.
To get create a statement of movements in capital accounts and their sub-accounts by going to Reports tab, then Capital Accounts Summary