Statement of Owner’s Equity

Learning Outcomes

  • Prepare a statement of owner’s equity

There is something you may notice about creating financial statements: at this point, all the brain work is done. Now you just take numbers off the adjusted trial balance and fill them into a form.

The statement of owner’s equity builds off the income statement, starting with revenues and expenses combined ($1,350 net income), adding capital, and subtracting any withdrawals.

NeatNiks
Adjusted Trial Balance
For the month ended October 31, 20XX
Reference No. Accounts Adjusted trial balance
Debits Credits
110 Checking 3,500.00
120 Accounts Receivable 5,650.00
125 Supplies 1,000.00
130 Prepaid Rent 10,000.00
210 Account Payable 1,600.00
220 Contractor Payable 1,200.00
310 Nick Frank, Capital Contributions 20,000.00
330 Nick Frank, Withdrawals 4,000.00
410 Service Revenue 8,750.00
510 Insurance Revenue 1,500.00
520 Rent Expense 2,000.00
530 Supplies Expense 1,600.00
540 Contractor Expense 2,300.00
Totals Single line 31,550.00
Double line		 Single line 31,550.00
Double line

 

NeatNiks
Statement of Owner’s Equity
For the month ended October 31, 20XX
Nick Frank, Capital, October 1, 20XX $0
Owner contributions 20,000
Net income/(loss) for the month 1,350
Single Line21,350
Owner withdrawals (4,000)
Nick Frank, Capital, October 31, 20XX Single Line$17,350Double Line

If there had been a loss instead of net income (if expenses had exceeded revenues), that loss would have been subtracted from the capital and would be noted with parentheses. Also, the ending balance on October 31 will be the beginning balance on November 1.

Practice Question

Now we’re ready to create the balance sheet.