• 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 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

 

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.

Now we’re ready to create the balance sheet.