USA Need Some Help in Understanding Accounting Basics

[MJ1984]

Dears


I am happy to joint this forum as i started liking numbers recently . I need your help in understanding owners equities in Companies little bit. Your help is really very appreciated. I have bought a share in company 4 years ago and i feel that there are some concepts of accounting are not clear for me. Now lets assume the scenario is like this:

- Capital is 10,000,000 USD, I bought 20% by Giving my partner 2M USD. So 20% for me 80% for Him.
- Our main business is importing electronics and distribute in the Market.
- In the same year our main suppliers started giving us a Credit facility for 4 months.
- At the end of the year we have sales of 50M USD, Cost is 40M USD. Basically we have 10M USD as profit.

My Question here is that how we can calculate the capital at the end of year ?? because most likely we will have some goods bought by credit from our suppliers and received in our warehouse and sold before the end of the year (Will affect the cash in our bank account). But paying to our overseas suppliers for these goods will be in the next year. I am happy to hear your comments.







MJ

 

[dvph-rl]

Hi @MJ1984, great question!, Let us try.

Capital.. 10,000,000 (20:80)
Sales.. 50,000,000
-----------------------------------------
Total Asset.. 60,000,000
(less) Liabilities.. (Credit Facility for 4 months)
-----------------------------------------
Working Capital.. (total asset - liabilities)

However, if the goods will be paid next year, you may consider this as transaction deemed sale even without realizing any income or profit from it yet, so you still include the payment for the warehouse and supplier this year and just declare whatever cost you will incur as expense or tax credit next year.