1. Chapter 5-3 Equity Section of the Balance Sheet

2. Critical Thinking What is the impact of the Income Statement on the Balance Sheet? What does Net Income change capital? How does a Net Loss change capital?

3. Formula to Update Capital ___________________ + __________________________ – _________________ = ________________________ The Net Income (Net Loss) figure will come from the Income Statement therefore the _______________________ _________________________

4. A Classified Balance Sheet

5. Owner’s Equity (OE) on the B/S Now we need to include net income (loss) and drawings into the Balance Sheet. Ex. Pg 155 : Owner’s Equity – E. Boa Capital Balance January 1$21,878 Net Income$8,209 Drawings 3,950 Increase in Capital 4,259 Balance December 31$26,137

6. Example 1 T. Smith, Capital Capital Balance, January 1st 2015: $20,376.64 Net Income for the year: $10,594.03 Drawings for the year: $15,376.70 T. Smith, Capital Balance, January 1st 201520,376.64 Net Income Drawings Decrease in Capital - Balance, December 31st 2015 $ -

7. Example 2 S. Brown, Capital Capital Balance, July 1 2015: $31,216.40 Net Loss for the year: $5,147.62 Drawings for the year: $19,400.00 T. Smith, Capital Balance, July 1st 201531,216.40 Net Loss Drawings Decrease in Capital - Balance, June 30 th 2016 $ -

8. Example 3 S. D’Angio, Capital Capital Balance, January1 2015: $47,005.12 Additional Investments: 30,000.00 Net Income for the year: $23,604.89 Drawings for the year: $20,000.00 S. D’Angio, Capital Balance, January 1st 201531,216.40 Additional Investment Net Income Drawings Increase in Capital - Balance, December 31st 2015 $ -