Where to account for purchased equity

Michael_O

Hi guys.
My company recently purchased equity stake in another company. In order to facilite the purchase, I put private funds into the company - and used the funds to purchase shares of another (non listed) company.
Those shares pay dividends.
Do you know how I can accurately display this in the accounting?

Alexia

Hi @Michael_O!

We have three things to account for here: Adding funds from your pocket to your business, accounting for your shares and accounting for the dividends.

1. Transfering money from a private account to your business is fairly painless. All you have to do is create an income transaction on the Transactions page using your business' bank account as the Account, and Owner's Investment/Drawings as the category.
2. For buying stocks, you'll first have to create an asset account. You can do this from the Chart of Accounts Page. Create an asset account named "Shares of [Name of the company]. Once that's done, create a bill for the amount of the shares, and categorize it to that asset account.
3. When you receive dividends, you can just record it as an income transaction. You might want to create an income account for dividends in your Chart of Accounts to track that income independently.

Does this answer your questions? Let me know if you need more information or have other questions.

DehanLouw

Makes a lot of sense! Follow up question- how would you handle selling the stock? (Obviously you would need to account for capital gain/loss)

AlexL

Hey @DehanLouw , I'm afraid this is something we can't comment on as it is considered complex accounting. I'd recommend reaching out directly to an accountant and they should be able to advise you on this.

canoeman2

I recorded a owner purchase of shares as recommended in May 7 2018 reply. The shares show as total other equity in the balance sheet. But the transaction does not appear in the reconciliation report. This means I cannot reconcile my back account. Am I doing something wrong? Is there a fix?
Thanks...
Andrew

NancyC

hey @canoeman2 as long as your bank account was selected as the "Account" for the income transaction, it should appear on that account's reconciliation page. Please keep in mind the transaction date (ensure the period you're viewing for reconciliation covers that transaction date). If you're still not seeing that transaction appear on the reconciliation page, please reply with a screenshot of the transaction details for that transaction. Thanks!