Q:

What is a capital contribution in accounting?

A:

Quick Answer

About.com explains that a capital contribution in accounting is a segment of a company's recorded equity. The amount may be contributed using cash, equipment or other fixed assets. A common way for an owner to contribute capital to a company is to buy stocks.

Continue Reading
What is a capital contribution in accounting?
Credit: Don Bayley E+ Getty Images

Full Answer

About.com notes that capital contributions are very valuable to a company because it shows that the company has a cash value. Banks look favorably on capital contributions when considering a business loan. In a limited liability corporation, a company owner's liability extends only as far as the owner's capital contributions.

Capital contributions are commonly known as paid-in capital. AccountingCoach.com notes that when contributing capital via a stock purchase, two accounting recordings must be made, one that records the amount the stock was purchased for and one that records the common or par value of the stock.

Learn more about Accounting

Related Questions

Explore