6.4 Creating initial bank balance

When a company is formed there is an initial investment. This varies by the type of company.

Jack’s company was formed as a corporation. The initial purchase of the company’s common shares needs to be entered into the bank account to establish the initial balance.

To do this Jack will create a manual Journal Entry which will debit the Checking Account (1060) and credit the Common Shares account (3350). Jack’s initial investment was $5000.00.

To do this Jack will:

1. 1.

   Navigate to General Journal $\to$ Journal Entry

2. 2.

   Enter “0001“ into the Reference field

3. 3.

   Enter “Initial Investment“ into the Description field

4. 4.

   Select account 1060 in the first row of the Account column

5. 5.

   Select account 3360 in the second row of the Account column

6. 6.

   Enter “5000“ under in Debit column for account 1060

7. 7.

   Enter “5000“ under the Credit column for account 3360

8. 8.

   In the Source column for each row enter the source. This could be a check number, but our purposes we are going to enter “EFT“ for Electronic Funds Transfer (EFT)

9. 9.

   The screen should look like the screen show in Figure 6.8 on page 6.8

10. 10.

    Click “Update“

11. 11.

    The screen should look like the screen shown in Figure 6.9 on page 6.9

12. 12.

    Click “Save“ to save the transaction

13. 13.

    The screen should look like the screen shown in Figure 6.10 on page 6.10

14. 14.

    Click the “Post“ button to approve the transaction

15. 15.

    To confirm the initial balance navigate to General Journal $\to$ Reports $\to$ Balance Sheet

16. 16.

    Observe the new $5000.00 balance in the Current Assets section and the $5000.00 balance in the Share Capital section of the balance sheet report as shown in Figure 6.11 on page 6.11