Equity Account and Capital Account

Capital - Murray Wilson (Equity Section of the Balance Sheet)

Murray's Capital Accounts as of July 1, 200X, as of December 31, 200X and as of December 31, 200Y were calculated as follows:

  July 31
Dec. 31
Dec. 31
Beginning Capital $ 0 $17,400 $19,880
Add: Investments Made During the Year $17,400 $ 0 $ 0
Add: Current Year's Net Income After Tax N/A $ 5,480 $17,333
Less: Cash Drawings by Owner During Year N/A ($3,000) ($12,000)
Equals: Ending Capital Account Balance $17,400 $19,880 $25,213

Please Note:

-   N/A means Not Applicable to specified period!
-   Murray's plans to register his business as a sole-proprietor.

Therefore, on Murray's scheduled opening day (July 1, 200X) his Capital Account will show a balance of $17,400. Also, his ending capital account balance on December 31, 200X is forecasted to be $19,880, while his ending capital account balance on December 31, 200Y is forecasted to be $25,213. These values will appear under the Equity section of Murray's Forecasted Balance Sheet (s). Please Note; the Ending Capital of one forecasted period becomes the Beginning Capital of the following forecasted period (see above chart).

The appearance of the Equity section of your Balance Sheet will depend on the Legal Form of Your Business. Moreover, the items appearing under the Equity section of a corporation's balance sheet are quite different from a sole proprietorship's or partnership's Equity section.

For further information regarding the appearance of the Equity Section for a sole proprietor, partnership and a corporation, please refer to the section entitled "The Balance Sheet".

Categories: Forecasting