Thread: Urgent - Statement of Equity

I've been through my books several times and still need help.

Owners Equity ending balance in '08 is used for the beginning balance in '09. Ex: $30,000.

The amount used in the statement is prior to closing the accounts to the income summary, then, to the capital/equity account.

So, if the Statement of Owners Equity & the Balance Sheet show $30,000, before closing, yet after closing, the equity account is 10,000. How do you justify the difference if you start with the $30,000 ending balance of the prior year??

Your post kind of lost me but beginning of the year balances must start with closed end of year balances or its wrong.

The statement of equity is just a reconcilement of beginning equity to ending equity thus the posting of current period earnings (loss) is required. In your example, 20,000 is the current year loss that has to be posted before you begin the new year.

Annarchy,

Still not following as you present the year ended 12/31/09 as:

Statement of Owners Equity

Beginning Balance 12/31/08.....$30,000
Plus:
Investment by Owner...............10,000
Less:
Net Loss for period..................<30,000>

Ending Balance 12/31/09...........10,000

So what are you doing as you then start another statement with different data? Is this an interim 2010 or something else.........Not sure how one relates to the other.....Clarification needed.

At the end of 2009:

Statement of Owners Equity
Beginning Balance 12/31/09........$10,000
Plus:
Investments by Owner.................15,000

etc.....


Is the first statement, reflecting 10,000 at year end, correct?

Current year profit/loss is closed out to Retained Earnings. The changes shown in the reconciliation of each equity account for the period is what comprises your statement of equity. So either your statement or the books are incorrect if you have a difference.

Are you making closing entries that your software generates automatically thus creating duplicate entries?
Or does your software actually consider 12/31/09 a closed year with the balances rolled forward to the new year and no beginning P&L balances?

Oh, crud.... s/b 2007 and 2008, then 2009. I'm trying to provide all the reports for the bank and am knocking my head against the wall on this.

Is the first statement, reflecting 10,000 at year end, correct?

Yes

Current year profit/loss is closed out to Retained Earnings. The changes shown in the reconciliation of each equity account for the period is what comprises your statement of equity.

Retained Earnings - Not yet, soon we hope, only net loss, closed to Equity account.
1 Owner - 1 Equity account.

Are you making closing entries that your software generates automatically thus creating duplicate entries?

No, I don't use software, I use a manual double entry system. (IRS Audit for '08 was a riot, they shook thier heads.)

Or does your software actually consider 12/31/09 a closed year with the balances rolled forward to the new year and no beginning P&L balances?

The only balances rolled forward to the new year are the Balance Sheet Accounts.

So the 10,000 at end of 08 rolls to a beginning 09 of 10,000.

Based on what's revealed I would check:

Whether the 15,000 posted to owners investment is actually a debit (dividend) or a credit (additional contribution) as that would account for your difference. Check to see if the 5,000 equity balance is a debit or credit? Sometimes its easy to transpose a debit or credit balance onto the trial balance when manually creating. Foot the TB again to make sure it's in balance. Or perhaps dividends or withdrawals are not reflected.

I'll go through all the numbers again in the morning.

Ok, forget the example above. Hypothetical numbers are not working.

Closing entries for Revenues & Expenses were posted to the Income Summary, to close the temporary accounts, resulting in a Cr Balance of $8,000 in the Income Summary Account, which was posted to the Capital account as part of the closing process.

However, where or how does the COGS fit in the equation?

The COGS caused a net loss of 10,000 for the period.

I know I'm missing something here, I'm just not sure where it is.

Murphy's Law:

Post a question, find the answer in the book...




Income Summary Cr
Merch Inv. (Remove Beginning Balance) Dr

Merch Inv. (Record Ending Inv.) Cr

Income Summary Dr

Glad the problem is resolved.

The takeaway:

1) Solutions to problems are often found in areas other than our initial thoughts.
2) Developing and using a closing checklist still has merit.