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Corporation

A legal entity owned by its stockholders. Unlike a sole proprietorship or a partnership, a corporation can pay a working owner a salary.

In a corporation, you'll usually want to separate the stockholders' investment of capital from the stockholders' share of earnings.

To track paid-in capital or investments of stockholders, add an equity account with a name such as Capital Stock. Although you do need to have records of the names and investments of each stockholder, you probably won't want to show this detail on your chart of accounts. For the opening balance, enter the total paid-in capital as of your QuickBooks start date.

After you've set up all your accounts, the amount remaining in Opening Bal Equity represents retained earnings prior to the start date. You can rename this account with a name such as Prior Earnings or Pre-2003 Earnings.

QuickBooks automatically tracks the corporation's retained earnings for completed fiscal years in an equity account called Retained Earnings. After the end of the year, you may distribute some or all of the retained earnings of the corporation to stockholders as dividends.

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