Account type: Equity
Marks owner capital and reserve accounts under the Equity root.
In detail
Account type Equity marks the accounts that belong to the owners: Share Capital, Share Premium, Retained Earnings, General Reserve and Revaluation Surplus in the demo chart. These carry credit balances and sit at the bottom of the Balance Sheet, where Assets less Liabilities must equal them. Share Capital - YFF holds the Rs 25,00,000 the founders paid in, posted by the share issue entry. Retained Earnings - YFF is special: the Period Closing Voucher sweeps each year's income and expense into it, so it grows with profit and shrinks with losses and dividends. Posting an expense here by mistake hides it from the Profit and Loss.
Formula
Total equity = Share capital + Retained earnings + Reserves; Retained earnings = Opening + Profit for the year - Dividends
Accounting entry
| Account | Debit | Credit |
|---|---|---|
| Bank Account - YFF | Rs 25,00,000 | |
| Share Capital - YFF | Rs 25,00,000 |
How to record it in BRAccount
- 01Go to Accounts Setup > Chart of Accounts and expand Equity.
- 02Open Share Capital - YFF and confirm Account Type is Equity.
- 03A share issue posts the entry below via Share Transfer or a Journal Entry.
- 04Click View Ledger to read the capital paid in and any later changes.
- 05Read the equity section of the Balance Sheet to see the totals.
When to use it
Set on Share Capital and Retained Earnings.
Example from the demo books
Share Capital - YFF, Rs 25,00,000.