Question

A/c equation treatment of invested in personal shares?

Answer 1

There are two options:

Option 1: Record and maintain investment account in the business accounting records.

Investment in share is an asset, hence the accounting equation will be:

Addition to "Investment in shares" on Assets side.

Deductions from "Cash" on Assets side.

Option 2: Don't record and maintain investment account in the business accounting records.

Investment in shares is treated as the money taken out by the owner for his personal use. Hence, the entry is similar to cash withdrawal by the owner.

Deductions from "Cash" on Assets side and from "Capital" on Liabilities side.

Hope this helps. Ask for any doubt.