Hi Guys,
I'm doing some financial projections for a new company. I'm not sure how I should enter business setup costs for professional services rendered like for legal fees, electrician fees, etc? For instance, let's say I hire a consultant to help setup the company - how would I enter that into the books (which account should I enter it into)?
Also, I'm doing 3 years worth of pro forms, so I'm not sure how the startup costs would come into play? Since I'm doing 3 years worth financial statements, I assume I'd need 4 balance statements:
*Opening Day Balance Sheet
*Opening Day + 1 Year
*Opening Day + 2 Years
*Opening Day + 3 Years
Here's how I'm handling the startup costs. Please let me know if I'm mishandling anything:
DEBIT CREDIT
Asset - Cash: $1,000 Equity - Owner Capital Account: $1,000
Asset - Cash: $1,000 Liability - Loan Payable: $1,000
Asset - Equipment: $100 (5yr life) Asset - Cash: $100
$1,000 + $1,000 + $100 = $1,000 + $1,000 + $100
Year 1 Income Statement
Revenues: $500
Expenses: $320 (should the equipment purchased during startup be included here?)
Loan Interest Expense: $10
Depreciation Expense: $20
Total Expenses: $350
Net Income: $150
Year 1 Balance Sheet
Assets
Equipment - $100
Cash - $2000 + $500 (Revenues) - $320 (Expenses) - $10 (Loan Interest) = $2170
Accumulated Depreciation - ($20)
Total Assets: $2250
Liabilities
Loan Payable - $910
Equity
Owner Starting Capital Account - $1,000
Capital Distribution (eq. Net Income) - $250
Owner Equity Account (add paid off loan principal?) - $90
Ending Owner Equity + Capital Account = $1340
Total Liabilities + Equity: $2250
One big question I had is what happens as the loan is amortized? Where does the equity go. Let's say end of year, the company has repaid $90 worth of principal. Would that go into the Owner Equity Account?
I'm doing some financial projections for a new company. I'm not sure how I should enter business setup costs for professional services rendered like for legal fees, electrician fees, etc? For instance, let's say I hire a consultant to help setup the company - how would I enter that into the books (which account should I enter it into)?
Also, I'm doing 3 years worth of pro forms, so I'm not sure how the startup costs would come into play? Since I'm doing 3 years worth financial statements, I assume I'd need 4 balance statements:
*Opening Day Balance Sheet
*Opening Day + 1 Year
*Opening Day + 2 Years
*Opening Day + 3 Years
Here's how I'm handling the startup costs. Please let me know if I'm mishandling anything:
DEBIT CREDIT
Asset - Cash: $1,000 Equity - Owner Capital Account: $1,000
Asset - Cash: $1,000 Liability - Loan Payable: $1,000
Asset - Equipment: $100 (5yr life) Asset - Cash: $100
$1,000 + $1,000 + $100 = $1,000 + $1,000 + $100
Year 1 Income Statement
Revenues: $500
Expenses: $320 (should the equipment purchased during startup be included here?)
Loan Interest Expense: $10
Depreciation Expense: $20
Total Expenses: $350
Net Income: $150
Year 1 Balance Sheet
Assets
Equipment - $100
Cash - $2000 + $500 (Revenues) - $320 (Expenses) - $10 (Loan Interest) = $2170
Accumulated Depreciation - ($20)
Total Assets: $2250
Liabilities
Loan Payable - $910
Equity
Owner Starting Capital Account - $1,000
Capital Distribution (eq. Net Income) - $250
Owner Equity Account (add paid off loan principal?) - $90
Ending Owner Equity + Capital Account = $1340
Total Liabilities + Equity: $2250
One big question I had is what happens as the loan is amortized? Where does the equity go. Let's say end of year, the company has repaid $90 worth of principal. Would that go into the Owner Equity Account?
