Hi Alan,

I’ve been using your “How to Prepare Financial Statements” in getting ready to file a T2 return for a corporation.

It’s been open for a year, and I’m bit confused with how capital assets (a computer) would be reflected on the equity part of the balance sheet. For simplicity’s sake, let’s say net profit = 0, no liabilities, no dividends, and the computer was a capital asset worth $1K at purchase previous financial yer, $500 at the start of the year and depreciated to $50 by the end of the year (not the right numbers, I know. But to keep it simple) Let’s say there was $100 in the company’s account at the start of the year.

What would retained earnings start/end look like on the balance sheet? I believe equity should be $150 (50 computer, 100 cash) but I’m unclear about how the $50 from the computer shows up in the equity section of the balance sheet.

MadanCA Team edited question