How to Calculate Contributed Capital

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Contributed capital includes all investments made in a business. Small business contributed capital usually comes from the owners of the business or from private investors. Corporations sell shares of stock publicly to generate cash for business operations. Accurate records are essential for both large and small businesses; all investors expect a return on their investment either in the form of dividends or principal payments, and each entity must keep track of the total contributed capital for financial reporting purposes.

  • Set up a new account name and type for each source of contributed capital in your accounting program or general ledger. Give each account a name that relates to the source and classify the account as equity.

  • Keep careful records of each transaction involving contributed capital. Credit (increase) the contributed capital account and debit (increase) the cash account upon sale of stock or receipt of investment funds. Debit (decrease) the contributed capital account and credit (decrease) the cash account when investment funds are repaid or stock is bought back from shareholders.

  • Run an equity report in your accounting software or add the ending balance of each contributed capital account together to reach the total contributed capital balance.

  • Transfer the total to the balance sheet under the heading "Shareholder's Equity."

References

  • Financial & Managerial Accounting: The Basis for Business Decisions; Jan Williams et al.; 2010
  • Photo Credit Thinkstock/Comstock/Getty Images
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