What is Owner Capital, January 1, 2014 for Rocky’s Day Spa?

Prepare for the Cengage Accounting Exam 1. Use flashcards and tackle multiple choice questions with hints and detailed explanations. Be exam-ready!

Multiple Choice

What is Owner Capital, January 1, 2014 for Rocky’s Day Spa?

Explanation:
Owner Capital is the owner's equity in the business at the start of the period. It reflects what the owner has invested plus any earnings kept in the business, minus withdrawals. To find it for January 1, 2014, use the accounting equation: Assets minus Liabilities equals Owner’s Capital. If you’re given the asset and liability totals for that date, the difference gives the opening Owner Capital. In this problem, those totals balance to 68,000, so that is the opening balance. The other numbers would arise from different asset-liability amounts or from misaccounting investments, earnings, or withdrawals, but the correct opening equity comes from the asset–liability difference.

Owner Capital is the owner's equity in the business at the start of the period. It reflects what the owner has invested plus any earnings kept in the business, minus withdrawals. To find it for January 1, 2014, use the accounting equation: Assets minus Liabilities equals Owner’s Capital. If you’re given the asset and liability totals for that date, the difference gives the opening Owner Capital. In this problem, those totals balance to 68,000, so that is the opening balance. The other numbers would arise from different asset-liability amounts or from misaccounting investments, earnings, or withdrawals, but the correct opening equity comes from the asset–liability difference.

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