The Statement of Owner's Equity (Capital Statement)

• The proprietorship's capital account represents his or her ownership in the assets of the business.
• Part of the earlier discussion centered around the fact that whatever net income the business earns also belongs to the owner.
• The owner has the right either to withdraw the profits that the business earns or to reinvest the income in the business.
• Because some information used in the statement of capital is prepared after the income statement.
• Ask three question (same income statement)

     Example: Statement of Owners Equity

                                                        Shehgarlynn Laundry

                                                Statement of Owner's Equity

                                           For the Year Ended December  31, 2007

Shehgarlynn, Beginning Capital... Jan. 1, 200.........................................25,300

Add: Invesment........................................35,750

           Net Income .....................................45,490         81,240

Less: Shehgarlynn, Withdrawal.................                       10,650 

        Net Increase in Capital..................................................................... 70,590

Shehgarlynn, (Ending) Capital, Dec. 31, 2007....................................  $95,890

Note: Changes in the proprietor's capital from the beginning of the accounting period to end  of that periods.

1. A permanent increase in the proprietor's investment in the business. (addition to capital). 
2. A permanent decrease in the proprietor's investment in the business, (subtraction from capital.)
3. The proprietor's withdrawal of assets from the business, usually in anticipation of profits (subtraction from capital).
4. The recognition of net income for the period (addition to capital).
5. The recognition of a net loss for the period (subtraction from capital)

Accounting Desk Book 2012 By Plank, Lois Ruffner/ Morris, Donald/ Plan (Google Affiliate Ad)