The first thing that you need to do when preparing the statement of owner’s equity is to find the beginning capital balance. It may seem like a simple task, but knowing where it can be found will save you time and frustration.
There are three places from which you can get this information:
1) The opening paragraph on page 1 of your company’s financial statements;
2) On Schedule O in your 10-K report or annual report; and
3) On page 1 of your company’s balance sheet.
This information will be found in one of these three places, and if you are not able to find it there then the balance sheet is an excellent place to start.
Knowing where this important number can be found when preparing your statement of owner’s equity can help save a lot of time and trouble during the process.
Information about how to calculate capital balances for interest or dividends received has also been provided on pages 12-18 in chapter 16 of Accounting Fundamentals by Linda Smith Blalock. It may seem daunting at first but following her guide step-by-step should make taking care of business much easier!
The Beginning Capital Balance: All You Need Know
What does that mean? The beginning capital balance is what the wealth is when a new business starts.
What are the three places where this information can be found? The balance sheet, income statement, and retained earnings statements should always list the starting capital of the company on each one. If you don’t see it in any of these three locations then go to your financial statements which will generally have that information too.
How does an individual find out how much they need to pay for their initial investment? To figure that outtake what was invested from all sources (including cash and loans) and subtract what was withdrawn from all sources (also called liabilities). There may also be some costs involved with opening up a location so make sure those get taken into account as well!
Where might I want to go to find out the ending balance for an owner’s equity? You will want to go into your financial statements.
What does a company do when they have invested more than their initial capital and need some extra cash on hand? They can either take out loans or issue stocks.
How do I figure out how much money is in retained earnings when it is not listed anywhere else? All of that information should be found by going through the income statement, balance sheet, and summary of changes in net worth documents. These are all pretty straightforward so you shouldn’t ever get lost!
Do I always need to keep this information up-to-date with my finances even if nothing has changed yet? Yes, because these numbers are used as indicators for where you are in the life cycle of your company.
What is the beginning capital balance? This refers to how much money was originally invested into a business when it started up, and where they got that investment from!
When preparing for an owner’s equity statement, one question that may come to mind is “Where do I find information about my starting capital?” You will want to go through your financial statements in order to find this important information. Companies can take out loans or issue stocks if they need more cash on hand; however, what does retained earnings mean?
The retained earnings are simply money that a company has made through various transactions and avoided paying out to its owners as dividends; it will be listed in your balance sheet with all other assets, liabilities, and equity accounts. The beginning capital balance can always be found by going to this account on the balance sheet–you may also want to take note of how much retained earnings you had at the end of last year so you have an idea about what percentage growth or decline occurred from one fiscal period to another. You’ll want to make sure everything balances up if not then there’s probably something wrong with your accounting process!
If you have any additional questions then just go ahead and leave a comment! I’ll always be happy to help.