Learning Aim – To understand the purpose of a Balance Sheet

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Presentation transcript:

Learning Aim – To understand the purpose of a Balance Sheet Success Criteria – To create our own Balance Sheet Key words – Balance Sheet, Assets, Liabilities 5 mins. Need worksheets and books placed around tables. Exercise books also. Post it notes

The Balance Sheet A business OWES things It also OWNS things

Liabilities – Things you owe The Balance Sheet Assets – Things you own Liabilities – Things you owe

The BALANCE Sheet What happens if we OWE more than we OWN?

Fixed Assets A fixed asset is anything that you own as a business that can be useful to your business for longer than one year.

Fixed Assets What fixed assets would a restaurant have?

Is this a fixed asset? In your own words, explain why the toilet roll is NOT a Fixed Asset.

Current Assets Current assets last LESS than 12 Months! Once you use them then they have gone and need to be replaced.

Current Assets Stock – Ingredients/materials Cash – In the till Debtors – People who owe you money

The balance sheet Owe Own Current liabillities Fixed Assets CurrentAssets

Fixed or current asset?

Can you think of examples of each for a greengrocer? Balance Sheet Fixed Assets, Current Assets, Current Liabilities Can you think of examples of each for a greengrocer?

Open your envelope – Can you put the balance sheet in the right order?

Current liabilities Current Liabilities are things that a business will need to pay out for within 12 months. Creditors are people that your business owes money to e.g. your suppliers. They will want paying back within ONE year! Overdrafts and credit card borrowing also need to be paid back and they are normally paid within ONE year.

Current Assets – Current Liabilities Working Capital Current Assets – Current Liabilities Why is working capital so important?

Questions Why is it important for your assets to equal your liabilities? What might happen to a business if it owes more than it owns? How can a business reduce what it owes (liabilities)? Is there a problem with owning too much (having too many assets)?