Capital Account for Sole Proprietors, Partnerships and Corporations

Owner(s) Capital Account note to the financial statements

The "Capital" account appears under the equity section of an unincorporated company's balance sheet. It tallies the owner's investments, profits made from operations, and cash drawings of each owner of a sole proprietorship or a partnership. Moreover, an owner's capital account note will show a reader all expected activities within the account. Furthermore, this note should provide detailed information on how you arrived at the ending capital account balances in your forecasted financial statements.

PLEASE NOTE: only a sole proprietorship and partnerships will have a capital account - most corporations use "Share" accounts and "Retained Earnings" accounts to tally investments, operational profits, and payments made to shareholders (dividends). Below provides an example of a capital account note to the forecasted financial statements.

Capital Account of the Company's Owner:
The capital account balances of the company's sole owner, Joey James, is as follows.

200X 200Y
Capital account beginning balance - Joey James $20,500 $31,000
Add: forecasted net income after tax per year $25,500 $29,000
Less: cash drawings by owner $15,000 $20,000
Equals: ending capital account balance $31,000 $40,000


The beginning capital account balance of $20,500 is comprised of $15,000 cash and computer equipment appraised at $5,500. Both items will be invested by Joey James on March 20, 200X - the planned company's inception. The ending capital account balances ($31,000 and $40,000) can be viewed under the equity section of the company's 200X and 200Y forecasted balance sheets.


Categories: Financial