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?

Questions