Owner Investment Journal Entry
The owner of the company usually needs to invest the money or other assets in the business to start-up the company or to expand the business. Likewise, the company needs to make the owner investment journal entry when that happens.
Either owner’s investment in the company is in the form of cash or other assets, both assets and equity on the balance sheet will increase in the same amount of the investment.
Owner investment journal entry
The company can make the owner investment journal entry by debiting the cash or other assets account and crediting the paid-in capital account.
In this journal entry, the paid-in capital can be the common stock account or the common stock account with the additional paid-in capital account if the company is a corporation. On the other hand, if the company is a sole proprietorship, it will be the ordinary paid-in capital account in the owner’s equity section.
Owner investment example
For example, the owner of the company ABC which is a sole proprietorship invests $50,000 of cash in the company for the business operation.
In this case, the company ABC can make owner investment journal entry by debiting the $50,000 in the cash account and crediting the same amount in the paid-in capital account.
In this journal entry, both total assets and total equity on the balance sheet of the company ABC increase by $50,000.
Another example: the owner of the company XZY invests a building which is evaluated to be $200,000 in the company to use as the office for the operation.
In this case, the company XYZ can make the journal entry for the owner investment by debiting the $200,000 in the fixed asset account of the building and crediting the same amount to the paid-in capital account.