Investor Funding Documentation

Here`s a Chart of Accounts for Investor Funding, designed to track both the rounds of funding and the equity issued to investors. This setup will ensure accurate and transparent accounting for investor contributions:

Account Code	Account Name	Account Type	Description
3000	Investor Equity – Round A	Equity	Equity issued to investors in funding Round A.
3100	Investor Equity – Round B	Equity	Equity issued to investors in funding Round B.
3200	Investor Equity – Round C	Equity	Equity issued to investors in funding Round C (if applicable).
3300	Additional Paid-in Capital	Equity	Any additional amount paid by investors above the par value of shares.
3400	Retained Earnings	Equity	Accumulated net income retained in the company.
1000	Cashe/Bank	Asset	Cash received from investors.

Example Transaction Flow: Recording Funding and Equity Issuance

Step 1: Recording Funding from Investors

Investors contribute $500,000 in a Round A funding event. The company issues equity in return.

Account	Debit	Credit
Cash/Bank (1000)	$500,000
Investor Equity – Round A (3000)		$300,000
Additional Paid-in Capital (3300)		$200,000

Step 2: Issuing Additional Shares in a Second Round (Round B)

In a subsequent funding round, investors contribute $750,000 in exchange for additional equity.

Account	Debit	Credit
Cash/Bank (1000)	$750,000
Investor Equity – Round B (3100)		$500,000
Additional Paid-in Capital (3300)		$250,000

Summary of Investor Funding Workflow:

Record Investment: Debit Cash/Bank for the amount of cash received from investors and credit Investor Equity and Additional Paid-in Capital to reflect the equity issued.
Track Funding Rounds Separately: Use distinct equity accounts (e.g., Round A, Round B) to distinguish between different funding rounds for better transparency.
Monitor Retained Earnings: Use Retained Earnings to track profits reinvested into the business or allocated for future use.