How to record an “in-kind” capital contribution

If you want to record somebody giving you an asset in return for equity, here’s how:

So let’s say that somebody wants equity in your company.  In exchange for the equity, they’re willing to give you an asset that you need (time, machinery, land, etc.).

What you have to do is make two separate transactions: one transaction recording you purchasing the asset for cash, and then another transaction of you selling equity to the person in return for the cash you’ve just given them.  What you’re recording is basically you buying the asset for cash, and then selling the equity back to the person in exchange for the cash you’ve just given them.

Simple enough, right?

In StratPad, this means that you will want to go into the View Financials – Options – Assets tab on the left-hand side and create an asset that is worth the value of the equity you’re selling. Give it an appropriate name, and make the value the same as the salvage value. (You’ll need to give it a lifespan as well, but it won’t affect your business plan.)

Once that’s created, you’ll want to then create an equity investment of the same value as the asset you’ve just made.  Give it an appropriate name, and that’s it!

These will then show up on your balance sheet as the assets and liabilities they are and (hopefully) all balance out.

Good luck!