it is a sheet produced at the end of a financial year stating a summary of a firms assets,...
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Balance Sheets
It is a sheet produced at the end of a financial year stating a summary of a firms assets, liabilities and capital.
What is a balance sheet?
• Assets being the resources owned by a business.
• Liabilities being the debts of a business.
• Capital being the money put into the business by the owner(s).
Here is an example of a balance sheet by
a company named Kodak.
The structure of Balance sheets may vary between different companies, however, they all provide of financial summary of a firm.
Structure
In all balance sheets, the value of assets will equal the value of liabilities and capital. This is because all resources purchased by a business have to be financed from either capital or liabilities. Therefore;
Assets = Capital + Liabilities
Equation
Current assets are assets that will be changed into cash within one year. It includes ; Stocks Debtors Cash
Current assets
Current Liabilities are business debts which must be repaid within 12 months. They include; Trade creditors Leases and hire purchase Short term loans and overdrafts
Current liabilities
Long term liabilities is any money owed more than one year. They may include; A mortgage A long-term loan Long-term leases and hire purchase
Long term Liabilities
Balance sheets are used to show the financial position of a business at a point in time. Examples may include;
It shows the value of all business assets, capital and liabilities.
It shows the performance of a business and its potential
It shows the asset and capital structure of a business
What for?
1. What is the equation?2. Name one example of a Current liability3. Name one example of a Long Term Liability4. Name one example of a Current assets5. How does a balance sheet benefit a
business?
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