Balance Sheet Record Keeping Curriculum Georgia Department of Education Agricultural Education Written by Jimmy Scott Georgia Ag Ed Curriculum

1 Balance Sheet - Defined The Balance Sheet is a summary of how funds are invested in the business (assets) and the financing methods (liabilities or debt, and equity or net worth) used. View the Balance Sheet as a snapshot of the business’s financial situation at a point in time.

2 Answers Five Questions 1.Do total assets exceed total liabilities? (solvency) 2.Will the firm meet immediate financial obligations? (liquidity) 3.How much loss could the business sustain? (risk-bearing capacity) 4.What collateral is available to support a loan? 5.How have business trends changed over time?

3 Balance Sheet Liabilities + Assets Owner Equity

4 Assets 1.Current Assets Cash or other assets which can be converted to cash through the normal operations of the business during the year. Current assets are: Checking and/or savings accounts Inventory held for resale 2.Non-Current Assets Assets used in producing a product or are not sold and not converted into cash within one year. Non-Current assets are: Tractors Barns Breeding Stock

5 Liabilities 1.Current Liabilities Debts due within the operating year. Current liabilities are: Accounts payable Rents Notes payable – current portion 2.Non-Current Liabilities Debts due in more than one year. Non-Current liabilities are: Notes payable – non-current portion

6 Owner Equity 1.Assets Anything of value owned by or owed to the business on the date the balance sheet is completed. 2.Liabilities Any financial commitment owed by the business on the date the balance sheet is completed. 3.Owner Equity Total Assets – Total Liabilities = Owner Equity

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