Balance sheet basics

[jejekh]

Hi All,

I have never done any accounting before and am now trying to produce statements for my small company.
I just don't understand the simple principle of the balance sheet.

Let's say it's my 1st year of operation. I start with a capital of 10,000 USD.
I purchase 4000 USD of inventory.
I sell half for 3000 USD.
My remaining inventory is worth 2000 USD.
My fixed costs are 1000 USD.

Let's say no tax. I'd say I have income deficit of 2000 USD.

In the balance sheet,

My total assest would be: 8000 USD cash + 2000 USD inventory = 10000 USD
No liabilities.

Equity:
Capital: 10000 USD
Accumulated Deficit: 2000 USD
Total : 8000 USD

The balance sheet doesn't balance and I don't understand how it could.

Thanks for lighting me up.

 

[ArcSine]

If you sold half your inventory for 3,000 and then incurred 1,000 of expenses, you didn't lose 2,000....you exactly broke even.

Total equity remains at 10,000 and balance sheet balances.

 

[jejekh]

Got it, thanks. I was not including inventory difference in cost of goods for income statement. Was just looking at cash profit.