Copyright  2006 Pearson Education Canada Inc. 9-1

Copyright  2006 Pearson Education Canada Inc. 9-2 Outline  The Balance Sheet  Balance Sheet Formats  The Classified Balance Sheet  Assets  Liabilities  Shareholders’ Equity  Statement of Retained Earnings

Copyright  2006 Pearson Education Canada Inc. 9-3 The Balance Sheet  A basic financial statement  Reports the financial status of a company at a point in time  Includes assets, liabilities and shareholders’ equity accounts  A classified balance sheet provides users useful information concerning the firm’s financial position of the company

Copyright  2006 Pearson Education Canada Inc. 9-4 Balance Sheet Formats  Account Format  Report Format

Copyright  2006 Pearson Education Canada Inc. 9-5 The Classified Balance Sheet ASSETS, LIABILITIES, AND EQUITY ACCOUNTS ARE CLASSIFIED INTO ACCOUNT CATEGORIES

Copyright  2006 Pearson Education Canada Inc. 9-6 Current Assets  Cash and other items that can be converted into cash or consumed by the business within one year from the balance sheet date

Copyright  2006 Pearson Education Canada Inc. 9-7 Hospitality Sample Firm Co., Inc. Balance Sheet December 31, 2007 In thousands of dollars Assets Current assets Cash Marketable securities Accounts receivable less: allowance for doubtful accounts of $420 Inventories Prepaid expenses Total current assets $4, ,060 2,200 1,300 $10,240

Copyright  2006 Pearson Education Canada Inc. 9-8 Property and Equipment Land Buildings Furniture, fixtures, and equipment Total property and equipment Less: accumulated depreciation Net property and equipment $16,800 73,000 20, ,900 14,100 $95,800 PROPERTY AND EQUIPMENT Assets used in operations to produce revenues

Copyright  2006 Pearson Education Canada Inc. 9-9 Items with a future value which are not used in operations  Intangible assets: Goodwill, trademarks, patents, pre-opening expenses  Long-term investments: Investments in subsidiaries & restricted cash  Long-term receivables  Cash surrender value of officer’s life insurance OTHER ASSETS

Copyright  2006 Pearson Education Canada Inc Other Assets Deferred charges Investments and advances to affiliates Other Total other assets $ 2,250 10, $13,050 OTHER ASSETS

Copyright  2006 Pearson Education Canada Inc Liabilities Current Liabilities  Due within one year from balance sheet date

Copyright  2006 Pearson Education Canada Inc Current liabilities Current portion of long-term debt Account payable Income taxes payable Accrued expenses Total Current liabilities $3,00 0 1, ,800 CURRENT LIABILITIES $6,400

Copyright  2006 Pearson Education Canada Inc Long Term Liabilities  Due after one year from balance sheet date

Copyright  2006 Pearson Education Canada Inc Shareholder’s Equity  Preferred Stock  Common Stock  Retained Earnings  Treasury Stock

Copyright  2006 Pearson Education Canada Inc Shareholders’ Equity  Ownership in Corp.  Preferred shareholders have preferences on earnings and upon liquidation.

Copyright  2006 Pearson Education Canada Inc RETAINED EARNINGS  Accumulated net income not distributed in the form of dividends  Separate statement of retained earnings

Copyright  2006 Pearson Education Canada Inc TREASURY STOCK  Stock re-acquired by the company  Reduces number of shares outstanding  Deduction from shareholders’ equity

Copyright  2006 Pearson Education Canada Inc Shareholders’ Equity Common Stock $1,650 Additional Paid in Capital 4,100 Retained Earnings 2,140 Total Shareholders’ Equity $7,890

Copyright  2006 Pearson Education Canada Inc Statement of Retained Earnings  Includes the detail of changes affecting the retained earnings account during the accounting period  Two main elements affect the change in retained earnings between two accounting periods: Net income or net loss Dividends declared by the corporation