Calculating the total capital of a company?

Question

I was wondering how do we calculate the total capital of a company? Which items should I look for in the financial statements? And how do I calculate notes payable? Is the same as accounts payable?

Answer 1

I am answering this question a little late because I just saw it as outstanding with no prior answers. I am doing so in the spirit of fostering a mentoring relationship with anyone as a protégé/student and myself as your accounting mentor.

Now onto the first question: the total capital of a company represents the total equity of the entity. Thus, it will be the sum difference of Assets less Liabilities. 

Traditionally for a corporation, it will be its issued Common Stock; plus any excess received over stated par value as ‘Paid in Capital in Excess of Par for Common Stock’; likewise it may include issued Preferred Stock and any associated ‘Paid In Capital in Excess of Par for Preferred Stock’.

Deduct any purchased outstanding Common or Preferred Stock by the corporation itself as Treasury Shares. If the Treasury Shares have been re-issued & re-sold in the outstanding stock market, then recognize a ‘Paid in Capital from Sale of Treasury Stock’ when appropriate.

Recognize any accumulated net income by closing the net profits into Retained Earnings. Retained Earnings may be reduced by Dividend declarations to stockholders.

The second part of your question concerns: And how do I calculate notes payable? Is (this) the same as accounts payable?

This is a little more nebulous. No, it is not the same as Accounts Payable (AP). AP is traditionally for trade accounts payable due within 30 days or less. Naturally, some trade accounts will be longer than one-month aging. Traditionally, AP will be trade debt owed less than one year in aging and be classified as a Current Liability.

Notes Payable by its clinical definition must be evidence by a written note (or else its not a ‘Note Payable’). Mortgages are a type of Note Payable - without digressing into a deep, theoretical conversation. Notes Payable should be divided into its current portion due within the next twelve months and its long-term portion due in excess of twelve months.

I hope this answer will allow anyone to better understand the total capital of a company (and notes payable, too). As I mentioned there is a span between your question, my discovery of it, and my provided answer!

I do have some availability in my schedule for a few new proteges who desire to be mentored on a regular basis in accounting, excel, or business. Feel free to contact me via Wyzant’s iMessage system. Best of luck!