If the business is a corporation and the owner's infusion of cash is an investment, the account Common Stock is credited. (If the common stock has a par value, Paid-in Capital in Excess of Par is also used.) If the owner lends cash to the corporation, the liability account Notes Payable to Stockholder is credited. When the asset is not cash, the amount recorded is the cash equivalent or fair market value of the asset or the fair market value of the common stock issued, whichever is more clear.
You should consult with your accounting and tax professional about the pros and cons of investing versus lending.
Studies show that exam questions are a great way to learn and retain important information. Gain access to our 1,700 accounting exam questions (and answers) when you upgrade to PRO.