Making The Balance Sheet Balanced

[dannydekker5]

Hi

I have the most stupid question probably but i just cant figure it out and its been bugging me. I'm making a business plan and in the finance section I am stuck with this. I've simplified my question and im sure you guys can answer!

I need balance sheet in balance so here is an example

Assets:
0

Liabilities:
0
Owners equity:
0

------------
balanced, take out a loan 10.000.
------------

Assets:
cash 10.000

Liabilities:
loan 10.000
owners equity:
0

------------
someone consulted me for a month, i must pay 1.000 10 days after finishing
------------

Assets:
cash 10.000

Liabilities:
loan 10.000
AP 1.000
Owners equity:
0

----------
no longer balanced... what am i doing wrong here? Same example can be used with unpaid salaries, or maybe loss of inventory... what happens to balance it out again?

Thank you!
Danny

 

[Naeem Baig]

Balance Sheet is not Direct point of transaction. When you incurred AP 1.00 liability, then it means that you have to pay this 1.00 amount after 10 days, so you would record it as below:
Consultancy Expenses [Debit] = 1.00
Account Payable [Credit] = 1.00

It means now you have made one expense and in case there is no sales, no revenue then that expense will result as loss. So Loss will reduce the owner's equity. So now owner's equity is minus 1.00

Assets :
Cash = 10

Liabilities:
Loan = 10
AP = 1
Equity= (1)
Net Liability = 10

Now owner have to put 1. 00 into cash, after owner pays 1.00 I to cash, then again balance sheet will be balanced:

Assets :
Cash = 11

Liabilities:
Loan = 10
AP = 1
Equity= 0
Net Liability = 11

 

[Drmdcpa]

Wrong answer. What makes your balance sheet out of balance is you are failing to take into account the impact the consulting services has on equity.

The transaction is

Debit consulting expense
Credit AP

Balance sheet

A
10

L
11

E
-1