1

I have a small business and I am being asked to produce a balance sheet. I have a very simple business model: I do hourly work and get paid on a 1099 basis. It is an LLC but I treat it kind of informally, basically taking all money out for personal use as soon as I receive it, and leaving say $1,000 in the business bank account at all times. Let's say I have made $50,000 this year so far. I am struggling to understand how this should look on the balance sheet, specifically the following:

  • Should the assets section of the balance sheet display only $1,000 (as cash) since that is what is maintained in the bank account, or will the assets section somehow indicate something about my $50k total income for the year?

  • In the owner's equity section, will I show a retained earnings of $50,000, and then an owner's draw of ($49,000), to match the $1,000 on the assets side?

2
  • Who is asking for the balance sheet? An investor? A banker? The tax authority? Oct 30, 2021 at 21:06
  • @mhoran_psprep a mortgage broker
    – J T
    Oct 30, 2021 at 21:10

1 Answer 1

1

Yes, that is very close to what I think they're looking for.

The only difference is that equity gets split out in to two categories:

Equity as it existed as of the start of your fiscal year (probably the calendar year unless you've done the work of changing it to something else): owner's equity

The amount of profit this year (from your profit and loss statement): Net Income

And then the amount of cash you've taken out of your LLC would be owner's draw.

That way it's possible to see how this year's net income stacks up to the equity life-to-date.

Also might consider any assets you use in your business, for instance a computer. The computer at market value could be listed as an asset as well, and that same amount would be an addition to owner's equity.

You must log in to answer this question.

Not the answer you're looking for? Browse other questions tagged .