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The Balance Sheet

The Balance Sheet

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The Balance Sheet

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  1. The Balance Sheet

  2. The Balance Sheet is: • a financial statement showing the financial position of a person, business, or other organization on a specific date; usually prepared at the end of the accounting/fiscal period

  3. Example: Company Name Financial Statement Name Date (own) (owned) Listed in order of liquidity (from cash to things that take longer to sell) Alpha Order Alpha Order

  4. Important Features: • A=L+OE: • set up in the form of the accounting equation where assets are listed on the left side and liabilities and owner’s equity appear on the right side (account form) • ASSETS: • things that you own that have a dollar value Accounts Receivable: --money owed by customers (debtors)   Accounts Payable: --money owed by the business (creditors)

  5. LIABILITIES: • debts owed • OWNER’S EQUITY • owner investment (capital) or net worth; assets – liabilities • WHO? the name of the business • WHAT? the name of the financial statement • WHEN? the date on which the financial position is determined

  6. LIQUIDITY: • the order in which assets are converted into cash (ie. cash us usually considered the most liquid and is listed first) • CLAIMS AGAINST ASSETS: • the order in which assets are sold when a business closes operations in order to pay liabilities; bank is paid first, then accounts payable, and the owner receives any remaining money; however, the owner also has to accept any losses that might result from selling off the assets

  7. FULL DISCLOSURE: • the financial details of any item are fully disclosed on a balance sheet; record assets at cost value • TOTALS: • the two final totals, one on each side of the balance sheet, should equal and are recorded on the same line and underlined with a double line

  8. Sample Balance Sheet • Prepare a balance sheet for pacific trucking as at June 30, using the following information Accounts Payable – Dini Bros. $1,516 Accounts Receivable – W. Caruso 150 Equipment 22,174 Bank Loan 18,000 Cash 3,265 Supplies 2,465 Accounts Payable – Packham Supply 3,946 Trucks 55,075 Accounts Receivable – R. Van Loon 620 B. Rissien, Capital $$$$$$

  9. Homework: • Answer Exercise # 1, 2, 3 p. 28-29 (t), p. 9, 10 (w)****pick 2 of 3****