380 Investments

Owner’s Equity

Net Worth

Synopsis

Account 380 is established for partnerships and proprietorships to record the Investments of owners.  Corporations may not use this account.

Debits

Credits

  1. Balance in the drawings account at the end of the accounting year

  2. Net loss at the end of the accounting year

 

  1. Investments in an unincorporated business

  2. Net Profit at the end of the accounting year

 

Example 1

Record the additional investment of $50,000 made by one of the partners.

Journal: Cash Receipts

Entry:

 

Debit

Credit

Account 201

Cash on Hand

$50,000

 

Account 380

Investments

 

$50,000

Example 2

Record the transfer of the balance of $10,000 in the drawings account at the end of the accounting year.

Journal: General Journal

Entry:

 

Debit

Credit

Account 380

Investments

$10,000

 

Account 390

Drawings

 

$10,000

Example 3

Record the transfer of the net profit of $1,365,137 at the end of the accounting year.

Journal: General Journal

Entry:

 

Debit

Credit

Account 399

Profit or Loss

$1,365,137

 

Account 380

Investments

 

$1,365,137

Comments

A credit balance represents the investment and retained profits accumulated in prior years in an unincorporated business.

Note:

Separate general ledger accounts should be provided for each partner. The balances in these accounts should be combined in Account 380, Investments on the operating report.