Capital contributions

You may need to include a line on your balance sheet for capital contributions. This category is also a corporate account and represents any amounts that the shareholders of the company invest in the business on a semi-permanent basis. For example, if a shareholder knows that the company will need financing to cover its accounts receivable, the shareholder may invest $20,000 in the corporation and not expect it back in the short term. If the shareholder does expect it to be returned soon, you would post it to the due to/from shareholder category in the liabilities section.

Retained earnings

Retained earnings represent the accumulated amount of income the corporation still possesses after it has paid all taxes and dividends (discussed below). This net income has accumulated over the life of the corporation. Here's an example:

Yr1	Net income	$1,000
	Less: Income taxes	(250)
	Less: Dividends paid	(425)
	Equals: Retained earnings	$325

 

Yr2	Net income	$1,200
	Less: Income taxes	(300)
	Less: Dividends paid	(150)
	Plus: Opening retained earnings	325
	Equals: Closing retained earnings	$1,075