the classified balance sheet
Post on 18-Feb-2017
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Facilitator: Gregory Samuels
Balance SheetAt the end of the lesson students should be able to:
Explain the concept of a Balance Sheet
Identify the components of a Balance Sheet
Classify items under the correct categories of a classified balance sheet Construct a classified Balance Sheet
Balance SheetDEFINITION: A financial statement that summarizes a company's assets,
liabilities and shareholders' equity at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by the shareholders.
The balance sheet must follow the following formula:Assets = Liabilities + Shareholders' Equity
The Balance SheetAssets
Anything the Business OwnsOrder of Liquidity
LiabilitiesAnything the Business OwesPromise of MoneyMaturity Date
Owner’s EquityBeginning Capital – Add: Net Income – Less:
Drawings and/or Net Loss – Ending Capital
The Account Form Balance Sheet
The Classified Balance SheetNow that you are used to it...
LET’S CHANGE IT!!
The Classified Balance SheetIs a lot more specific than the balance sheet
you are used toWe are now grouping accounts within our
main categoriesAssets & Liabilities more specifically
Different categories allow us to dive into the numbers and compare similar items
ASSETSAssets are broken down into two categories1.Current Assets
Assets that are smaller and easy to turn into cash within the year
Cash, Accounts Receivable, Supplies, Inventory2.Fixed Assets
Sometimes called Plant & Equipment Long term assets used in making goods or
providing services Large items: Equipment, Car, Building, Land
LIABILITIESVery similar to assetsBroken into two groups1.Current Liabilities
Debts to be paid off within the year Accounts Payable, Bank Loan, HST
Payable/Recoverable2.Long-Term Liabilities
Debts to be paid off in over a year Mortgage, Long-Term Bank Loan
Owner’s EquityWhat we have already learned
Beginning BalanceNet Income/LossDrawingsNew Balance
Analyzing NumbersA number that stakeholders like to know is
called working capitalThe amount of money that the company should
have to work with on a short term basisThe higher the betterIndicates how easily the business can pay off
its debts
Current Assets – Current Liabilities
The Classified Balance SheetWe are no longer going to put our balance
sheet into Left Side and Right SideThis was to teach you the difference between
Debit Accounts and Credit AccountsWe will be listing ours from top to bottom
Kind of like the income statementThere will be one column for the accountsThere will be two columns for the numbers
PT’s PIZZABalance Sheet
October 31, 2013
The Asset SectionAssetsCurrent AssetsCash xxAccounts Receivable xxTotal Current Assets xx
Fixed AssetsEquipment xxAutomobile xxBuilding xxLand xxTotal Fixed Assets xx
Total Assets xx
The Liabilities SectionLiabilitiesCurrent LiabilitiesAccounts Payable xxHST Payable xxHST Recoverable (xx)Total Current Liabilities xx
Long-Term LiabilitiesBank Loan xxMortgage Payable xxTotal Long-Term Liabilities xx
Total Liabilities xx
The Owner’s Equity Section
Owner’s EquityD. Fense, Capital Oct. 31
$45000
Add: Net Income $1400
Less: D. Fense, Drawings
($950) $450
D. Fense, Capital Nov. 30
$45450
Put it all together...See question on the web site
The following information was retrieved from the books of L. Sands.Fixtures and fittings $500, Stock valuing $300, Debtors totaling to $680, Cash at Bank amounted to $1510 and Cash $20, Creditors $910. He initially introduced $2000 capital and made a profit of $800. At the end of the period he withdrew $700.From the following construct a classified balance sheet. (MS Word)
Homework
See assignment in Google docs
Reference
Robinson S. & Wood F. (2004). Principles of Accounts for the Caribbean. Essex: Pearson Education Limited.
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