If the owner of a company invests personal funds into his company, where does that fit into the balance sheet.
I know the cash will increase, but I don't know how it put it in the equity section. For example, If Greg Jones invests $2000 into his company, would to equity section of Balance Sheet, in report form for the month of April, look like this?
EQUITY
G. Jones, Capital at March 31 = $70000
Net Income (loss)= $60000
G. Jones Drawings= -$5000
G. Jones Investment= $2000
G. Jones Equity at April 31= $127000
Thanks.
To understand where the owner's personal funds fit into the balance sheet, let's break it down step by step.
1. The owner's personal funds are considered an investment in the company. This means that the company's cash account will increase by the amount of the investment.
2. In terms of the balance sheet, the owner's investment will typically be recorded under the equity section. Specifically, it will be included in the owner's capital account.
3. In the given example, assuming Greg Jones invests $2000 into his company, the equity section of the balance sheet for the month of April would be as follows:
- G. Jones, Capital at March 31 = $70000 (starting capital balance)
- Net Income (loss) = $60000 (profit or loss for the month)
- G. Jones Drawings = -$5000 (owner's withdrawals during the month)
- G. Jones Investment = $2000 (owner's investment during the month)
To calculate the owner's equity at April 30, you need to add or subtract the various items:
G. Jones Equity at April 30 = [G. Jones, Capital at March 31] + [Net Income (loss)] + [G. Jones Drawings] + [G. Jones Investment]
G. Jones Equity at April 30 = $70000 + $60000 - $5000 + $2000 = $127,000
Therefore, in the example you provided, the equity section of the balance sheet for the month of April would indicate G. Jones' equity at $127,000.