THE BALANCE SHEET. The Balance Sheet is: a financial statement showing the financial position of a person, business, or other organization on a specific.

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Presentation transcript:

THE BALANCE SHEET

The Balance Sheet is: a financial statement showing the financial position of a person, business, or other organization on a specific date; usually prepared at the end of the accounting/fiscal period

Example: Company Name Financial Statement Name Date (own) Alpha Order Listed in order of liquidity (from cash to things that take longer to sell) (owned) Alpha Order

Important Features: A=L+OE: set up in the form of the accounting equation where assets are listed on the left side and liabilities and owner’s equity appear on the right side (account form) ASSETS: things that you own that have a dollar value Accounts Receivable: --money owed by customers (debtors) Accounts Payable: --money owed by the business (creditors )

LIABILITIES: debts owed OWNER’S EQUITY owner investment (capital) or net worth; assets – liabilities WHO?the name of the business WHAT?the name of the financial statement WHEN?the date on which the financial position is determined

LIQUIDITY: the order in which assets are converted into cash (ie. cash us usually considered the most liquid and is listed first) CLAIMS AGAINST ASSETS: the order in which assets are sold when a business closes operations in order to pay liabilities; bank is paid first, then accounts payable, and the owner receives any remaining money; however, the owner also has to accept any losses that might result from selling off the assets

FULL DISCLOSURE: the financial details of any item are fully disclosed on a balance sheet; record assets at cost value TOTALS: the two final totals, one on each side of the balance sheet, should equal and are recorded on the same line and underlined with a double line

Sample Balance Sheet Prepare a balance sheet for pacific trucking as at June 30, using the following information Accounts Payable – Dini Bros. $1,516 Accounts Receivable – W. Caruso 150 Equipment22,174 Bank Loan18,000 Cash 3,265 Supplies 2,465 Accounts Payable – Packham Supply 3,946 Trucks55,075 Accounts Receivable – R. Van Loon 620 B. Rissien, Capital$$$$$$

Homework: Answer Exercise # 1, 2, 3 p (t), p. 9, 10 (w) ****pick 2 of 3****