Understanding Financial Statements and Business Organizations
Q: Will you explain capital injections and withdrawals again?
A: Capital injection means an owner or investor has put cash into the company in the form of paid in capital or additional capital stock or partners’ equity or proprietor’s capital, depending on the type of business. Such an investment increases the net worth account of the company. The point is that the capital injection is a transfer of cash from an owner or investor to the company. The owner or investor now has a larger dollar investment in the company by so doing.
A distribution or withdrawal is the opposite. An owner or investor takes cash from a net worth account, thereby decreasing net worth. By so doing the owner or investor now has a smaller dollar investment in the company.
Course overview: Understanding Financial Statements and Business Organizations