Читать книгу Financial Accounting For Dummies - Maire Loughran - Страница 62

Most sole proprietors initially fund their business from personal sources, which can be either cash or noncash. An example of the first is depositing cash that you’ve saved up into the business bank account. I do a step-by-step on process in Chapter 5.

After that initial cash infusion, many sole proprietorships have an on-and-off need over the years for an additional owner influx of cash. It’s a simple fact of doing business that sometimes you have to pay for business expenses before you collect the money from your customers.

When you started your sole proprietorship, you may already have personally owned inventory (see Chapter 13) or computer equipment that you convert to business use. If you decide to make these assets the property of the business, you increase your owner's capital by the amount of the fair market value of the assets, which is what an unrelated third party would pay in an open marketplace.

For example, you’ve decided to upgrade your sewing hobby to handcrafting and selling organic cotton t-shirts. You have a bolt of the organic cotton fabric left over from your home sewing days that originally cost $125. Comparable fabric is selling online for $100. The fair market value for this inventory item is $100.

You have been patiently waiting to see how you get paid your draw as a sole proprietor, so here it is! Generally, the amount you can pay yourself at any time is the total of your cash contributions plus money you bring in by selling your t-shirts less the cost of raw material you had to buy to make your t-shirts such as thread and any other business costs like postage.

Unlike the way your employer pays you, sole proprietors don’t have taxes withheld from their draw. They just write themselves a check, which is an addition to their draw account and reduces overall owners’ equity.

You’ll find a blown-out statement of owners’ equity for a sole proprietorship, which includes the draw, capital and owners’ equity accounts in Chapter 9.