Home – New Forums Money matters Injecting Cash into Company Reply To: Injecting Cash into Company

James Millar
  • Total posts: 1,739

You could book this one of two ways.

Option 1 is a loan arrangment (simple credit loan) as referred to above. There is no requirement to charge interest. If the loan is “at call” then you need to keep on eye on the retained earnings / profitability / equity section of the balance sheet at all times. If you record this is a credit loan and have some losses there is a strong chance the company will have negative net assets on the balance sheet. Negative net assets can prima facie indicate insolvency and accordingly you can’t trade (Corps Act).

Option 2 is to book it as equity / paid up capital / share subscription. This is a one way contribution and cannot easily be redrawn. The upside is that you are far less likely to have the negative net asset position so technical insolvency is less likely to occur.

The most common would be option 1 thoughout the year and let your accountant address compliant treatment (provided they can).

Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900