The Balance Sheet. What is a Balance Sheet? A financial statement that shows the company’s assets, liabilities, and net worth (also known as equity) on.

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Presentation transcript:

The Balance Sheet

What is a Balance Sheet? A financial statement that shows the company’s assets, liabilities, and net worth (also known as equity) on a given date A financial statement that shows the company’s assets, liabilities, and net worth (also known as equity) on a given date It is like a ‘snapshot’ or picture of a company’s financial affairs at a single point in time It is like a ‘snapshot’ or picture of a company’s financial affairs at a single point in time It is usually prepared on the last day of the month It is usually prepared on the last day of the month

Why use a balance sheet? You can compare different fiscal periods in order to see whether your business in increasing or decreasing in value You can compare different fiscal periods in order to see whether your business in increasing or decreasing in value

Assets Anything a company owns has dollar value Anything a company owns has dollar value Assets earn income for the company Usually divided into several categories

Current Assets Any cash or asset that can be quickly turned into cash Any cash or asset that can be quickly turned into cash This includes cheques This includes cheques

Accounts Receivable Money for which a company has billed its customers, but has not received yet Money for which a company has billed its customers, but has not received yet Accounting practices is treated as an asset, even though the company has not yet received the cheques Accounting practices is treated as an asset, even though the company has not yet received the cheques

Invoices Bills sent to customers – usually asking the customer to pay within 30 days Bills sent to customers – usually asking the customer to pay within 30 days Credit card bills are like monthly ‘invoices’ Credit card bills are like monthly ‘invoices’

Liabilities Liabilities are debts owed by an organization or a person to another organization or person Liabilities are debts owed by an organization or a person to another organization or person Accounts Payable – the money that the business owes to other businesses that supply it with services Accounts Payable – the money that the business owes to other businesses that supply it with services

Types of Liabilities Current Liabilities: Accounts Payable (usually like invoices, done monthly) Current Liabilities: Accounts Payable (usually like invoices, done monthly) Long Term Liabilities: a debt or portion of a debt that doesn’t have to be paid within a year Long Term Liabilities: a debt or portion of a debt that doesn’t have to be paid within a year For example: a mortgage on a property a company might buy For example: a mortgage on a property a company might buy

Owner’s Equity The Amount of money the owner invested when starting the business, plus any accumulated profits (or minus any accumulated losses and money the owner takes out to live on The Amount of money the owner invested when starting the business, plus any accumulated profits (or minus any accumulated losses and money the owner takes out to live on

Questions to work on Work through pg 223 # 1-4 Work through pg 223 # 1-4