How should we structure equity if the project under the terms agreed is put on the background?
Normally equity is not redistributed if the venture pivots or even entirely changes its mission. The existing equity agreements and contracts may have exceptional conditions, but this is rare.If a party chooses to leave the venture, they may forfeit some equity, again per their equity agreement.
Can you please help me with this accounting problem?
I have to make a journal entry In addition to those accounts listed on the trial balance, the chart of accounts for Skyline Motel also contains the following accounts and account numbers: No. 142 Accumulated Depreciation—Buildings, No. 150 Accumulated Depreciation—Equipment, No. 212 Salaries and Wages Payable, No. 230 Interest Payable, No. 619 Depreciation Expense, No. 631 Supplies Expense, No. 718 Interest Expense, and No. 722 Insurance Expense. Other data: 1. Prepaid insurance is a 1-year policy starting May 1, 2014. 2. A count of supplies shows $750 of unused supplies on May 31. 3. Annual depreciation is $3,000 on the buildings and $1,500 on equipment. 4. The mortgage interest rate is 12%. (The mortgage was taken out on May 1.) 5. Two-thirds of the unearned rent revenue has been earned. 6. Salaries of $750 are accrued and unpaid at May 31.
What does a negative debt to equity ratio mean? What would it imply about a company?
As pointed out by Shane and Walid, we need to distinguish negative "net debt / equity" from negative "gross debt / equity" as the interpretation could be very different.Negative "gross debt / equity" would mean that the book value of equity is negative, in which case:the book value of assets is less than the book value of liabilities, which could mean:if the assets and liabilities are fairly valued, that the equity is worthless, either on a (spot) liquidation basis or (more worryingly) on a going concern basisnothing if book value of assets does not properly reflect fair value (eg if some properties are fully depreciated but carry significant economic value) or if some liabilities (eg non cash deferred tax liabilities) will never lead to disbursementsor to put it differently, the sum of equity injected in the business plus accumulated earnings minus dividends paid out is negative, which could mean (among others):that the business has been loss making on a cumulated basis, either due to operating losses (eg startup or troubled company), high interest burden (eg overlevered company) or funky "non cash" charges (eg goodwill amortization)that significant dividends have been taken out, presumably financed with debtNegative Net debt / Equity could mean either the same as above or alternatively negative net debt and positive equity, in which case, the business is "net cash" positive (ie has more cash & equivalents than it has financial debt) and book value is positive which is usually a good sign (eg cash generative business, conservative management)but if taken to extremes could also signal that management is hoarding cash for no reason meaning poor capital allocation skills and little regard for shareholdersHope this helps!
Why is owner's capital in a balance sheet shown on the liabilities side?
BASIC RULES FOR ACCOUNTING[From “Municipal Accounting for Developing Countries” by David C. Jones, CPFA, FCCA (UK)]"An accountant records and interprets variations in financial position. He records, in money values, the results of variations, during any period of time, at the end of which he can balance net results (of past operations) against net resources (available for future operations)".Rule 1The ledger system as a whole must always be in balance, otherwise it is not correct. The total of all debit entries (or debit balances) must always agree with the total of all credit entries (or credit balances).Rule 2To ensure that the ledger is always in balance, every change in the financial position must be recorded in the form of debit and credit entries of equal value. For all debit(s) there must be equal credit(s).Rule 3There are two main classes of ledger accounts, with related, but quite different, purposes:(a) accounts dealing with assets and liabilities (resources); and(b) accounts dealing with gains and losses (results).The net balance of assets over liabilities (resources) will always equal the net balance of gains over losses (results):NET RESOURCES = NET RESULTSRule 4In accounts dealing with assets and liabilities, all assets are recorded as debits, and liabilities as credits. It follows from this that:(a) increases in assets – positive resources – are DEBITS;(b) decreases in assets – positive resources – are CREDITS;(c) increases in liabilities – negative resources – are CREDITS; and(d) decreases in liabilities – negative resources – are DEBITS.Rule 5In accounts dealing with gains and losses, all gains are recorded as credits and all losses as debits. It therefore follows that:(a) increases in gains or surpluses – positive results – are CREDITS;(b) decreases in gains or surpluses – positive results – are DEBITS;(c) increases in losses or deficiencies – negative results – are DEBITS; and(d) decreases in losses or deficiencies – negative results – are CREDITS.
What are the different types of balance sheets?
The balance sheet is a statement of assets and liabilities including owner’s equity at a particular date of a business concern. Its main task is to exhibit the financial position of a business concern at a particular date.[1]2 Types of Balance Sheet are;Unclassified balance sheet.In an unclassified balance sheet, all assets are shown without making any classification. In a similar way, liabilities are also shown without making any classification.Classified Balance Sheet.In statement form balance sheet assets are shown first. Assets are shown classifying them into:Current assets,Investment,Property, plant, and equipment,Intangible assets.Footnotes[1] Balance Sheet: Meaning, Formula, Format, Types