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.
| 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 Expense | 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 |
|
| 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.
