Capital in the Balance Sheet

[drdmt]

Hello, I've started a Ltd Company and am in the process of creating a spreadsheet for all the accounts

Do I have the capital in the right place or does it go under its own heading>?​

Balance Sheet of Company as at 18/07/2010​

Fixed Assets
Nothing - 0.00

Current Assets
Cash - 50.00
Capital - 500.00

Long-term Liabilities
Nothing - 00.00

Current Liabilities
Outstanding bills - 20.00

Net Worth - 530.00​

 

[Figurate]

Capital normally has it's own heading/section,
generally called "Capital and Reserves"

Capital is actually a liability rather than an asset in the balance sheet.
(It's a liability to the shareholders)

 

[Figurate]

As it stands, your balance sheet doesn't balance.
On the face of it, you are missing £470 of net assets.

There are two "sides" to each transaction.
Since Capital is a liability in the balance sheet, you would expect to have net assets to match the amount of capital that has been put into the business.

What did you do with the capital when you put it into the business?
(eg. Did you put some into the bank?
If so, you'd have a bank balance in current assets.
or may be you brought some stock, say... in which case, you'd have current assets....
Have you started trading - is there a P&L account that you've not included?
etc... etc...)

 

[MyAccountantOnline]

Hello, I've started a Ltd Company and am in the process of creating a spreadsheet for all the accounts​

Do I have the capital in the right place or does it go under its own heading>?​

Balance Sheet of Company as at 18/07/2010​

Fixed Assets
Nothing - 0.00​

Current Assets
Cash - 50.00
Capital - 500.00​

Long-term Liabilities
Nothing - 00.00​

Current Liabilities
Outstanding bills - 20.00​

Net Worth - 530.00​

If you dont want the hassle of setting up your own spreadsheet VT cashbook is a free package which you can use - might be worth a look.

 

[elaine@cheapaccounting]

There doesn't seem to be any double entry there at all.

e.g.

If £500 of share capital then debit bank £500 credit capital £500

same for the cash and outstanding bill.

Dare I suggest an accountant?

 

[drdmt]

Hey guys thanks for all your replies they are very helpful

I have all the other accounts setup: Capital, Purchases, Bank and Sales accounts

Would you recommend that I have the Purchases and Sales account as one? is this called a Ledger?

I really don't want to go to an accountant partly because of the money mainly because it seems so simple to do in/out etc

Is this any closer

Balance Sheet of a Company as At 2011
Fixed Assets

Current Assets
Cash dr 250
Sales dr 500

Current Liabilities
Corporation Tax cr 100
Purchases cr 150

Long Term Liabilities

Capital and Reserves
Capital cr 100
Company Capital dr 300

 

[Figurate]

Um, it still doesn't balance...

No, I wouldn't recommend having the Sales and Purchases account as one. Figures from each of them would appear in different places in your balance sheet.

Not entirely sure why you have "Capital" and then "Company Capital" (and capital is not normally a debit...) The amounts seem to have changed from your first posting - is that right?

You've said it's a limited company, so you should have the actual share capital listed...

 

[David Griffiths]

I hope that you don't take this the wrong way, but I don't think that you have any hope of setting up your own spreadsheet to produce accounts.

I don't think that spreadsheets are a suitable basis for accounts anyway, largely because it's too easy to introduce significant errors. However, somebody who knows what they are doing might come up with something passable. It's painfully clear that you don't have any understanding of accounts at all, so I'd recommend that you go for a software package or just stick to listing transactions

 

[elaine@cheapaccounting]

Balance Sheet of a Company as At 2011
Fixed Assets

Current Assets
Cash dr 250
Sales dr 500

Current Liabilities
Corporation Tax cr 100
Purchases cr 150

Long Term Liabilities

Capital and Reserves
Capital cr 100
Company Capital dr 300

A few errors / questions ...

• sales are not assets
• purchases are not liabilities
• you need a profit and loss account
• how did you get the £100 corporation tax?
• What is the difference between capital and company capital?

My advice – please get an accountant

My guess is that your accounts are due soon. Fines start at £150 for a month late filing them.

I know it may well be that you do not have the money to get an accountant to do the accounts but unfortunately I am not sure that you have a choice.

Setting up a limited company does bring with it responsibilities – filing the accounts is just one of these.

Personally I think there needs to be some sort of warning when limited companies are set up.

In June 2011 38,548 new limited companies formed – I wonder how many of these know about their legal duties and responsibilities.

 

[drdmt]

Thanks again guys, my accounts aren't due until august next year and since accounts are an essential part of running a business I am trying to learn how to do them

Making the Balance sheet balance

Every time something is purchased it increases assets and so

Assets
Cash - 242.12 dr
Purchases - 108.00 dr

Liabilities
Capital - 190.00 cr
Sales - 160.12 cr

Totals
350.12cr 350.12 dr

 

[Jenni384]

Making the Balance sheet balance

Get some software - it will make it balance for you.

Every time something is purchased it increases assets

Not necessarily.

Purchases do not live on the balance sheet, nor do sales, and nor are either assets or liabilities.

I applaud your intention to get to grips with accounting, and that you're doing it in good time, but in the nicest way your level of understanding is not enough to be doing it in a spreadsheet. Get some accounting software (something free like VT cashbook, or something cheap and easy to use like AccountsPortal or Solar Accounts) and it will do most of the hard work for you.

As others have said, if you are a Ltd, then you really will need an accountant to be able to get things right at year end, at the very least.

Most of us will give an initial consultation for free, so it can't hurt to talk to an accountant to help you on your way - we should save you more than we cost, in both tax and potential penalties!

Good luck.

 

[Zara Accountancy]

Hi, I don't think you are really going to get anywhere with asking questions and picking it up as you go along. A good way to learn how to do your accounts would be to buy a book (e.g. accounting for non-accountants) and work through it.

Good luck!

 

[NoggintheNog]

As a starter, you have Profit and loss account Sales 160.12 Purchases 108.00 Profit 52.12 Balance Sheet Cash 242.12 Capital 190.00 Share capital and reserves 52.12 I assume that the 'capital' is actually cash you have introduced into the business, in which case it is probably best described as a loan. The term capital is usually refers to share capital.

 

[Davidad]

I think you need to do more than simply read a book. I am not an accountant, but did an A level in the subject last year. It's not a simple subject to pick up, and you will find that you need all the information in your head in order to work through accounting problems. So I would take some form of course or on line learning, and devote some time to the subject.

After a lot of hard work I now find I understand far more about business and business decisions than I did before setting up my business. IMHO I would say that its essential to either understand accounting or employ a good quality accountant in order to make sensible decisions as your business develops.

Good luck