cancel
Showing results for 
Search instead for 
Did you mean: 
tiernieb
Level 2

How to calculate owner's equity for an existing sole proprietor company?

I could use a little advice on how to calculate Owner's Equity for an existing (20 years) sole proprietor company. 

 

The business owner was asked to produce the Balance sheet report for the last 3 years so a potential buyer can review the financials.  The only problem that I have is how to calculate the owner's equity $$ amount as it has never been calculated.

 

The company was set up in QBO beginning in 2018, but the owner's equity was not entered b/c was not calculated by the tax accountant.  I do have Schedule C from 2015, 2016, and 2017 and the P&L for 2016, 2017, and 2018.

 

I can calculate owner's equity - Net Profit less owner's draw should = Owner's Equity.  What about any retained equity from prior years...should this be included?  Am I overthinking this?

 

2015 Net Profit - Owner Draw = Ending Owner's Equity

2016 Net Profit -2016 Owner Draw + 2015 Ending Owner's Equity = 2016 Ending Owner's Equity

 

This company is very basic and all assets have been fully depreciated.  Is has no A/R and the only accounts payable would be the current month's 2019 bills.  It has a  bank account and a credit card that have balances.

 

I want to calculate 2016 as such:

2016 Bank Account Ending Balance - 2016 Credit Card Ending Balance = 2016 Owner's Equity (Which should be Net Profit - Owner Draws).  

 

The only retained earnings if the bank account balance as of Jan. 1st.

 

I am a bit confused.  Any adive would be greatly appreciated.

 

 

My intuition says that:  Year-End Cash (Bank Account) balance - Year-End Credit Card balance =Year End Owner's Equity

 

 

1 Comment 1
Rustler
Level 15

How to calculate owner's equity for an existing sole proprietor company?

Equity is total assets less total liability

 

revenue, profit and loss, have nothing to do with it, other than the amount of money in the company accounts at the time the balance sheet is run.

Need to get in touch?

Contact us