Accounting, Payroll & Pension Issues/Form 1120 entry

Advertisement

Expert: - 6/11/2010


Question
As the owner of a c-corp, though currently unsalaried, I recently opened a business checking account with $500 (of my own money) as the required initial bank deposit. And, I received a $200 promotion on the account from the bank which is recorded as interest. Although I realize that I enter the $200 as interest income, my question is how to enter the $500 and consequently any withdrawals of some or all of the $500 initial bank deposit on the Form 1120.

Answer
Hi Fred-

You should record the $500 as an equity adjustment, not income.  Probably additional paid-in capital.  If you withdraw the money, it would be a return of capital.  Just reduce your equity account (essentially reversing some or all of the above entry.)  On your Form 1120, only the $200 would be income.  The rest would be reflected on the balance sheet portion (if you even have to complete that section of the 1120- you won't if you're small enough.)

Let me know if you need any further clarification. :)

All the best-
Vanessa

Accounting, Payroll & Pension Issues

All Answers

Answers by Expert:

Ask Experts

Volunteer

Vanessa D. Powell, CPA

Expertise

I am experienced with general bookkeeping, payroll, journal entries, adjusting entries, all types of pension accounting, compliance issues, ERISA, benefit plan auditing, financial statements, payroll tax, Form 5500, retirement planning, and related issues. Please no homework questions. Only US accounting, please.

Experience

I am a CPA in Southern CA. I audit not-for-profit organizations, corporations, and employee benefit plans for the large accounting firm I work for, as well as performing other attest services, planning, and tax services.

Organizations
California Society of CPAs, American Institute of Certified Public Accountants

Education/Credentials
Licensed CPA in the state of CA. Graduated summa cum laude from Colorado Technical University. In order to keep my license, I take 80 hours of CPE every two years. Much of it in the field of accounting, auditing, and employee benefit plans.

Awards and Honors
Graduated summa cum laude (with highest honor).

Past/Present Clients
I have clients from all over the world, in nearly every industry. Most of my audit clients are employee benefit plans and not-for-profit entities. Most of my compilation engagements are manufacturing, agriculture, and construction.

©2012 About.com, a part of The New York Times Company. All rights reserved.