![]() ![]() In most cases, Revenue and Expenses begin the year at zero. Financial statement elements (assets, liabilities, owners equity, revenue and expenses) are used as the inputs for the equations which feed into the. Īfter calculating balances for the new year, the equation would look like this (line #5): Line This is what happens when you Calculate Beginning Balances for New Year. The end of your fiscal year will have all expenses and revenue “closed” and posted to Owner’s Equity. The first beginning balance entered into Procare may have any date, but the end of your fiscal year is ideal. Let’s say you charged $30,000 in tuition (line #2 below), collected $25,000 in payments (also line #2), paid $25,000 in salaries (line #3), and had $5,000 still owed in accounts receivable (line #4). Lineĭuring the year, your business accumulates revenue and expenses, so the expanded equation would be:Īssets = Liabilities + Owner’s Equity + Revenue – Expenses. The basic equation for small business is:Īssets = Liabilities + Owner’s Equity, or more intuitively: Assets – Liabilities = Owner’s Equity.Ī basic would be a new daycare business with $15,000 in the bank, $5,000 in furniture, a $3,000 furniture loan, and your owner’s equity (line #1). Equity: Owner’s Equity is the remainder of the equation, which includes any profit (positive number) or loss (negative number) carried into the new year. ![]() Liabilities: Liabilities are obligations of the business and include things like payroll taxes withheld, long term loans, and utilities due.Assets: For a child care business, typical assets would be things such as checking accounts, office equipment, furniture, and accounts receivable.Without correct beginning balance (sheet) numbers, all subsequent reports would be incorrect. The Balance Sheet shows what the business owns (Assets), and who owns those assets (Liabilities and Owner’s Equity). The Beginning Balances are the initial values Procare will use for accounting reports and are comprised of assets, liabilities and equity. Whenever a new accounting system is used, a starting point for all the values needs to be created.
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