9.2 - PART A PREPARING FINANCIAL STATEMENTS THE BALANCE SHEET BBI 2O Name:

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Presentation transcript:

9.2 - PART A PREPARING FINANCIAL STATEMENTS THE BALANCE SHEET BBI 2O Name:

THE BALANCE SHEET Define the following terms ASSETS Things of value that a business or a person owns. LIABILITIES Are debts or amounts that are owed to others. OWNER’S EQUITY The owner’s investment in the business or the financial portion of the business that actually belongs to the owner. BALANCE SHEET EQUATION An equation expressed in two ways depending on which part of the equation is known. BALANCE SHEET A financial statement that shows the financial position of a business on a specific date. ACCOUNT RECEIVABLE Money owed to a business. ACCOUNT PAYABLE Money that a business owes to another. MORTGAGE PAYABLE The debt owed on a building.

THE BALANCE SHEET Assets Net Worth Liabilities (debt) Liabilities (debt) Total Assets Net Worth Liabilities (debt) Liabilities (debt)

THE BALANCE SHEET How do these equations work? Complete the following questions to prove these statements to be correct: Sonia has $9000 in assets and she owes $1600 to the bank and creditors. What is her Personal Equity? Now Sonia’s Net worth is $7400 and she has debts totaling to $1600. What is her Total Assets? Assets ($9000) Assets ($9000) Net Worth (7400) Net Worth (7400) Liabilities ($1600) Liabilities ($1600) Total Assets ($9000) Total Assets ($9000) Net Worth ($7400) Net Worth ($7400) Liabilities ($1600) Liabilities ($1600)

THE BALANCE SHEET If you borrow money to buy items you count the item’s FULL VALUE as an asset but then later you will subtract what you owe as a liability. This includes cash in the bank that has been loaned but not used at this time. For example: You buy an iPad for $800 and you borrow $300 from your family to buy it. If the iPad is the only thing you own then your Personal Equity equation would look like this: Assets $800 Assets $800 Net Worth $500 Net Worth $500 Liabilities $300 Liabilities $300 Total Assets $800 Total Assets $800 Net Worth $500 Net Worth $500 Liabilities $300 Liabilities $300

THE BALANCE SHEET A balance sheet is the device used to record and summarize financial information about assets, liabilities, and owner’s equity. The balance sheet is like that of a photo. It is a snapshot of the financial history of a business at a particular period of time. Each of you will be given a sheet of a Balance Statement Paper. We will work through an example together as a class.

THE BALANCE SHEET WHO?Mrs. T’s Computer Emporium WHAT?Balance Sheet WHEN?December 15, 2015

THE BALANCE SHEET Assets Cash6 500 Accounts Receivable8 100 Supplies500 Parts Inventory4 000 Equipment Building and Land Total Assets219100

THE BALANCE SHEET Liabilities Accounts Payable7 350 Bank Loan Mortgage Payable Total Liabilities128400

Mrs. T’s Computer Emporium Balance Sheet October 15, 2014 AssetsLiabilities Cash6 500Accounts Payable7 350 Accounts Receivable8 100Bank Loan Supplies500Mortgage Payable Parts Inventory4 000Total Liabilities Equipment Building and Land Owner’s Equity =90700 Total Assets219100Mrs. Talbot, Equity90700 Total Liabilities and Owner’s Equity219100

THE BALANCE SHEET Using the balance sheets provided to complete the following questions for homework: Pg #1, 2, & 19