A balance sheet is a snapshot of a company's financial position at a certain point in time that shows a company's assets, liabilities and owner's equity. The assets section of a balance sheet shows cash, short-term investments, accounts receivable, inventory and pre-paid expenses. Owner's equity is an amount that the business owes the owner-investor and is therefore totaled in the liabilities section of the balance sheet, which also includes loans, accounts payable and expenses payable.
1. Write or type "Owners' Equity" on the balance sheet. The owner's equity section is a liability and therefore should be placed in the liabilities section of the balance sheet.
2. Write or type "Contributed Capital" below Owners' Equity and then write the amount of contributed capital directly to the right. Contributed capital is how much money the owner put into the business. For example, if the company owes the owner $20,000 for startup costs, then the balance sheet would show: Owners' Equity Contributed Capital $20,000
3. Write or type "Retained Earnings" directly underneath "Contributed Capital" and then write or type the amount of retained earnings directly to the right, under the dollar amount for Contributed Capital. Retained earnings are the amount of profits owed to the owner but retained in the company for future use. For example, if the business made $40,000 in profit, but the owner only withdrew $10,000 in earnings then the business has retained earnings of $40,000 - $10,000 = $30,000. The balance sheet would show: Owners' Equity Contributed Capital $20,000 Retained Earnings $30,000
4. Add Contributed Capital and Retained Earnings together and then write or type that amount underneath the dollar figures for Contributed Capital and Retained Earnings, slightly to the right. In this example, the balance sheet would show: Owners' Equity Contributed Capital $20,000 Retained Earnings $30,000 _______________________$50,000
- Owner's Equity is part of the balance sheet equation: Assets = Liabilities + Owner's Equity.
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