I started recording transactions on sage for my husband's small company. He put some capital into it (say 5k). I debited bank and credited capital. Since then the money has been spent on computer equipment,stock and other misc expenses. It is comming to the year end and I'm not quite sure how I should treat the 5k sitting in the capital account.
sorry, maybe I'm being a bit dumb this morning but I don't 100% understand the angle of your question (or the reason why you are logged as zero posts at the moment?).
Ok, I'll answer the question that I think you are asking but please feel free to correct my understanding of your connundrum if I've misread your post.
The key to your answer is that there isn't 5k sitting in the capital account. What has happened is that the 5k depeosited in the business basically went straight to the bank but the double entry for that was to show that the bank (dr) was owed to the owners of the company in the Capital account (cr).
From the bank the money has been used to fund the setup of the enterprise so you will have had numerous (cr) entries against the bank going to equipment, stock, etc. (all dr's).
At the end of the year this information goes to the balance sheet the capital going to the equity in the bottom part of the balance sheet and the assets going to the assets owned by the entity in the top part of the balance sheet.
That's a really simplistic example but I think that it illustrates that the two halves of the balance sheet should balance. The top half being what the money is doing in the company and the bottom half being where the money came from.
So, as you can see, the 5k is not sitting in the capital account but has in fact been used to fund the operations of the company.
The capital will remain in equity unless the owner (your husband) withdraws it from the company which of course will also trigger a withdrawal of cash from the bank which will leave the two sides of the balance sheet in equilibrium.
Hope that this helps and if I've misunderstood the information that you are looking for please speak up and I'll be happy to go at the answer from a different angle or in more specific detail.
Kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Or we could have just quoted the accounting equation. Capital = Assets - Liabilities
I always go such a long way around the bushes to make a simple point don't I! No wonder my posts are always so long.
Actually, whilst we're talking about Assets and Liabilities have you notice that the IASB are changing the definitions as to what an Asset and Liability is again! What hope have we got when the powers that be spend years arguing over those definitions!!!
Anyway, absolutely beautiful weather in sunny Cannock this morning which makes me think I'm not going to be spending so much of the day on here today.
Talk later,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I know exactly what you mean on non current assets.
Wonder if anyone would listen if we started a campaign to push the theory that if it ain't broke don't fix it!
On the formatting thing I've found that cutting and pasting as a picture using the advanced editor seems to be the only way that I can keep formatting. In the past I've occassionally had to create the answer in Excel, cut and paste that into word and then cut from word to paste in the advanced editor.
Sure that there's an easier way of doing it but as I don't paste pics that often I've not really followed it through.
I should be studying at the moment as I've only got another 32 days left until P2 but sunshine and shopping seem to weighing heavily on the taking an "I can't take International Financial reporting standards anymore" side of the equation.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
