[Moosefactory]

This is my first time on this chat board so hopefully I do this right. I just setup Quickbook Pro and I don't have a clue how to put in the first entry. I purchased a $12000 cleaning franchise and put down $5500 with my credit card (paid that off in full when I got my statement) but finance the rest. From the reading I have been doing, I know it has something to do with an owner's equity account and capital account but not sure exactly how to set the books up. A few weeks later I set up a business checking account which is how I should have done it from the start.

Thanks in advance, Jeff

[CaptainForest]

Hello Jeff,

You have a company with no assets, no liabilities and no owner's equity.

First, for you to be able to buy something, you need money.

So you deposited (12,000-5,500) $6,500 into the business.

So the business recorded:
Dr. Cash 6,500
Cr. Contributed Capital 6,500

Now the business goes and buys a franchise for 12,000.

The business would record:
Dr. Franchise (or Other Asset account or whatever)12,000
Cr. Accounts Payable – Visa 5,500
Cr. Cash 6,500

Now, the Visa bill has come due, and you gave the business 5,500 to pay it.

So the business would:
Dr. Cash 5,500
Cr. Contributed Capital 5,500

Dr. Accounts Payable – VISA 5,500
Cr. Cash 5,500

As for the Franchise Asset of $12,000. That should most likely be amortized over the useful life of the franchise. If you are required to pay any additional fees per year, those fees would be expensed in the year they relate to.

[Moosefactory]

Thank you for the information.