Chapter 2
Linking Personal Accounting to Business Accounting
50
Ace Bookkeepers
Statement of Owner’s Equity
For the Month Ended March 31, 2016
Smith, Capital, March 1, 2016
$0
Add: Investment
30,000
Net Income
9,400
Less: Smith, Drawings
2,000
Smith, Capital, March 31, 2016
$37,400
______________
FIGURE 2.32
1
2
Since the business was started this month, the balance of the owner’s capital account was $0 at the
beginning of the month.The investment made in the first transaction is added, as is the net income
we calculated from the income statement (indicated by the number 1). The amount of drawings
by the owner is subtracted to give us a final balance of the owner’s capital of $37,400.The closing
balance for March will be the opening balance shown on April’s statement of owner’s equity.
Lastly, the balance sheet can be created to report on the balances of assets, liabilities and owner’s
equity on March 31, 2016.The balance sheet is shown in Figure 2.33. Notice how the value of the
owner’s capital is taken from the statement of owner’s equity (indicated by the number 2). Also
the total of the assets is equal to the total of liabilities plus owner’s equity.These totals must be the
same, otherwise the accounting equation is not balanced and there is an error either in recording
the transactions in the T-accounts or in the calculation of the financial statements.
Ace Bookkeepers
Balance Sheet
As at March 31, 2016
Assets
Liabilities
Cash
$ 29,900 Accounts Payable
$ 2,000
Accounts Receivable
3,500 Unearned Revenue
2,000
Prepaid Insurance
6,000 Bank Loan
7,000
Furniture
8,000
Total Liabilities
11,000
Owner’s Equity
Smith, Capital
37,400
Total Assets
$ 48,400
Total Liabilities & Owner’s Equity
$ 48,400
______________
FIGURE 2.33
2
