Thread: Urgent - Statement of Equity

How do you explain to the Owner, the $100,000.00+ investment shows a negative balance on the books?

Too little information.

Why would there be a surprise? Aren't regular periodic statements prepared? Isn't the owner involved?

You don't mention the time period not the underlying nature of the company's equity deficiency (as opposed to the owners personal investment account). Is it due to losses or dividends, over one year or several?

In my experience any engaged owner/investor already has a pretty accurate perception of the business situation prior to receiving the accounting statements.

Sorry it took me so long to get back here, I've been re-crunching all the numbers since the company started in '06, to produce accurate reports. So far, so good, the only one left to do is the projections....


Business: LLC; Sole Proprietor, (Joint Tenancy State/Husband-Wife owned.)

Why would there be a surprise? Aren't regular periodic statements prepared? Isn't the owner involved?

Yes, regular periodic statements are prepared, however, the CEO/Owner dislikes finances/accounting and stays away from all the bookkeeping.

You don't mention the time period not the underlying nature of the company's equity deficiency (as opposed to the owners personal investment account). Is it due to losses or dividends, over one year or several?

Net Losses have occurred each year since the business opened in '06. COGS was the main contributor, having to relocate in '08 also contributed to the losses. The owner is the only investor up to the end of 2009 investing personal assets to make up the deficit. There is no aging in the A/P.

I've used a 'capital' account to record all investments by the owner, however, applying the closing entries at the end of each year has caused the capital account to run into the red, instead of accurately displaying how much has actually been invested in the company to date.

Am I doing that wrong? Should I be using a different account? My education was in governmental and large corporation accounting, privately owned retail merchandise accounting has other avenues I am still learning.

In my experience any engaged owner/investor already has a pretty accurate perception of the business situation prior to receiving the accounting statements.

Basically, yes, technically, no.

Posting to the capital account is correct.

In your situation you might want to prepare a multiple year comparison - see http://www.creditaides.com There you can show the full four years side by side. The site examples show five years but you can elect to do four. Also available are reports using monthly or quarterly inputs.

Thank you for your assistance, it is greatly appreciated.

Respectfully,

Annarchy