I am a law student completing an accounting assignment. I have prepared an income statement and balance sheet for the following scenario, but want to make sure that my liabilities are correct.

Test scenario(abbreviated): I have finished law school and am starting my own practice after working for a law firm for seven years. I have moved $10,000 of personal funds into a business account and secured a loan for office equipment.

On my balance sheet, I list my liabilities as the balance of my student loan ($7,000), and the note balance for the equipment. Is this correct, or is my student loan considered a personal liability?

Any of your personal debt would not be included in the firms liabilities. Liabilities are strictly for the business/organization. Even if you used firm funds to pay your student loans, this would probably be counted as income for you, but it would not move the debt to the firm. Remember though, the personal funds of $10,000 are also included under owners equity which is combined with liabilities on the balance sheet. Assets = Liabilities + Owners Equity.