LESSON 7-2

1. LESSON 7-2 Balance Sheet Information on a Work Sheet Original created by M.C. McLaughlin, Thomson/South-Western Modified by Deborah L. Burns, Johnston County Schools, West Johnston High School

2. BALANCE SHEET • A balance sheet reports financial information on a specific date, indicating the financial condition of a business. • Information to prepare a balance sheet is obtained from the work sheet’s account title column and the balance sheet account balance columns • A balance sheet has 4 sections: • Heading • Assets • Liabilities • Owner’s Equity LESSON 7-2

3. BALANCE SHEET page 187 LESSON 7-2

4. HEADING OF A BALANCE SHEET page 187 1 2 3 1. Center the name of the company on the first line. 2. Center the name of the report on the second line. 3. Center the date of the report on the third line. LESSON 7-2

5. ASSETS AND LIABILITIES SECTIONS OF A BALANCE SHEET • A balance sheet reports information about the elements of the accounting equation • Assets = Liabilities + Owner’s Equity • The assets are on the LEFT side of the equation and on the LEFT side of the balance sheet • Information needed to prepare the assets section is obtained from the work sheet’s balance sheet debit column • Information needed to prepare the liabilities section is obtained from the work sheet’s Balance Sheet credit column LESSON 7-2

6. 1 6 Assets Liability amounts 5 Account titles 2 Account titles 4 Liabilities 7 Single line 8 Total Liabilities 9 Total of liabilities 3 Asset amounts ASSETS AND LIABILITIES SECTIONS OF A BALANCE SHEET page 188 LESSON 7-2

7. OWNER’S EQUITY SECTION OF A BALANCE SHEET • Two kinds of equities are reported on a balance sheet: • Liabilities, and • Owner’s equity • Only the amount of current capital is reported on the balance sheet. Current capital is calculated as shown: • Capital Account Balance + Net Income – Drawing Account Balance = Current Capital LESSON 7-2

8. 1 Owner’s Equity 2 Account title 3 Capital amount 4 Single line 5 Total Assets 7 Total Liab. and Owner’s Eq. 9 Compare totals 6 Total of assets 10 8 Double lines Total of Liabilities and Owner’s Equity OWNER’S EQUITY SECTION OF A BALANCE SHEET page 189 LESSON 7-2

9. 3 Net Income Current capital amount 8 1 Beginning capital Difference 6 Beginning capital amount 2 7 Ending capital 5 Single line 4 9 Drawing Total Liabilities and Owner’s Equity OWNER’S EQUITY REPORTED IN DETAIL ON A BALANCE SHEET page 190 LESSON 7-2