Investments by owners

Definition

Investments by owners are contributions of resources, such as cash or other assets, from owners to the business. These investments increase the owner's equity in the company.

5 Must Know Facts For Your Next Test

1. Investments by owners are recorded in the Statement of Owner’s Equity under the owner's capital account.
2. These investments increase both the asset side and equity side of the Balance Sheet.
3. Investments by owners do not appear on the Income Statement as they are not revenues or expenses.
4. The cash flow from investments by owners is shown under financing activities in the Statement of Cash Flows.
5. Owner investments can include non-cash assets like property or equipment, which are recorded at fair market value.

Review Questions

Related terms

Owner's Equity:

The residual interest in the assets of a business after deducting liabilities.

Statement of Owner’s Equity: A financial statement that shows changes in owner's equity over a specific period.

Financing Activities:

Sections of cash flow statements that show transactions involving debt, equity, and dividends.