Accounting advice?

[Wahine]

Since I've started my new coaching company, I've been bringing in enough money to cover my race registrations and travel but not much more. My accountant had me include a new bike as a purchase made for the company on my personal credit card. So overall, my balance sheet shows way more liabilities than money that has come in. Also, what spare cash I have in the company is from the opening balance loan from me.

A friend has offered to sell me her very slightly used computrainer. It would be a good company asset for performance testing, group trainer workouts and bike fitting. But I feel a little bit like I shouldn't be going too far into the red with things. She wants $800 for it but would likely take a little less.

I'm wondering if any of you accountant types out there have some input. From a starting company and taxes point of view is this bad? I'm generally very debt adverse so it's hard for me to spend money that my company doesn't have even if my company only has to borrow the money from me.

Thanks in advance for your help.

[Pika]

as you know, but when I opened up my clinic I was in the red for a very long time ( the clinic I mean) due to all the equipment expenditures. I paid it off as quickly as I could but still it was at least a few years. I don't think you'll find it is a problem for the business to be in the red..not sure of the advantages...but really that is a great offer for the computrainer and a really worthwhile investment for you.

[Wahine]

Thanks Pika. I really appreciate you chiming in.

BTW - I'll be looking into condo rentals this weekend.

[Mr. Bloom]

It's all a function of how deep your venture capitalists pockets are. You may need to have a secondary offer to raise capital. If you're debt averse, then make it equity. Sounds like you should have a quick board meeting, deliberate the question and take a vote.

On a serious note, if you are personally borrowing the money or constrained in any way from the expenditure, I encourage you to think twice UNLESS you can have a VERY QUICK and ASSURED return of your investment in 6 months or less from the additional fees you earn.

[Wahine]

Thanks Mr. S. I appreciate your advice. I have enough money tucked aside personally to easily cover the computrainer without straining my finances. It's just a matter of loaning my company more money from my personal account. I guess I'm just a little concerned about showing a profit at some point in the first 3 years of the company's existence. I'm not really sure how much money this will generate, especially in the current economy.

When you say put it in as equity, do you mean loaning the company the money to buy it and count that loan as owner equity?

Also, do you have an easy way to remember what's a credit and what's a debit when you're doing ledger entries? I'm confused about that. One day I think I've got it straight then the next I'm all twisted around again.

[Mr. Bloom]

Is the business incorporated? Since you're concerned about the three year profit rule, I'm assuming not...and if it's a small scale operation it may not really matter from an accounting perspective.

Debits vs. Credits:

Increase in Asset=Debit Increase in Liability or Equity=Credit
Decrease in Asset=Credit Decrease in Liability or Equity=Debit
Revenue=Credit Expense=Debit

But it's been 30 years since I was in accounting, so caveat emptor