Home – New Forums Money matters Newbie needs help…please!

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  • #982639
    Caseman
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    Hi Everyone

    This is my first post here :) I have trawled through a number of posts but didn’t find what I was looking for so I thought I would post it here.

    I have just started a business and am required to lodge a profit and loss statement for a 3 month period. When I was planning to open the business I completed a cashlow in my business plan and now I have to to compare the ‘actual to the budget’. This seems easy enough to do but I am caught on one bit…..

    In both senarios I contributed some funds to start up the business however in the budgeted senario the cash was used immediately and therefore it doesn’t factor in the profit and loss for the requested period. In the ‘actual’ senario I ended up using the start up cash over several months and contributed alot more (of course!).

    So my question is…..does the start up funds I contributed to the busines feature in the profit and loss if these funds were spent in this period? Or because they are a capital contribution (is that right?) they are not included?

    For example I used alot of the funds I contributed to buy inventory stock.

    Any thoughts would be appreciated because I am sure there is an easy answer to this and I am just over thinking things as usual.

    #1137911
    KellyB
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    Hi Caseman,

    The capital contribution is a balance sheet item, so is not shown on the P&L.

    Exactly where it is shown will depend on what entity structure you have, however it is likely that it should be shown as a liability ‘loan from owners’ or similar.

    Any drawings that you take from the business can then be offset against that balance sheet account

    Hope that helps!

    #1137912
    Caseman
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    Thanks heaps for that info Kelly its really helpful !

    #1137913
    Healthy Personal Finances
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    Agree. If you used the cash injection to buy stock – the entry is totally balance sheet.
    One side to a liability (probably – depending on structure) – loan from xxx, the other side would show as an asset – stock on hand.
    Once that stock is used the asset is reduced and your Cost of Goods Sold in the Profit and loss increases.

    Does that make sense ?
    Cheers
    Stacey

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