Struggling to Balance My Financials: How Do I Calculate Owner's Equity Correctly?

Dear friend,

I am submitting my income statement and balance sheet. Can you please review them and let me know if they are correct or incorrect? Additionally, my balance sheet is not balanced because I did not include owner's equity. How can I calculate the owner's equity to balance the balance sheet?

Thank you.

Please explain to me why net profit is placed on the liabilities side and net loss is placed on the assets side of the Balance Sheet. This is urgent for me.

Thanks & Regards,
Satyajit

The profit or net income belongs to the owner of a sole proprietorship or to the stockholders of a corporation, and so it is shown on the liability side. The owner's or stockholders' equity is reported on the credit side of the balance sheet. The balance sheet reflects the accounting equation: Assets = Liabilities + Owner's Equity.

For example, assume that you own a sole proprietorship and you provided a service to a customer. One of your business assets (cash or accounts receivable) increased, and your liabilities were not involved. Therefore, your business liabilities will remain the same, and your equity in the business will increase.

Accountants prepare an income statement or P&L to report the revenues and expenses, but the ultimate effect is that the business assets and owner's equity will increase when there is a profit or net income. Hope the same will be clear at your end.

Regards