1. Finance Balance Sheets

2. Learning Objectives Understand what a balance sheet shows. Know the difference between assets and liabilities. Be able to construct a simple balance sheet

3. Asset or Liability VehicleBuildingsBank Loan MachineryComputersFurniture OverdraftStockDebtors CreditorsCashBrand

4. Recap If a business is like a person, what is the balance sheet like? How do we keep ourselves fit and healthy? And a business?

5. Why do we need Balance Sheets? The purpose of the balance sheet is to give users an idea of the company's financial position along with displaying what the company owns and owes.

6. Assets = Assets = Liabilities + Equity Current assets (short-term): items that are convertible into cash within one year Non-current assets (long-term): items of a more permanent nature As total assets these =

7. Liabilities + Current liabilities (short-term): obligations due within one year Non-current liabilities (long-term): obligations due beyond one year These total liabilities +

8. Equity Shareholders Equity or Funds Shareholders' equity (permanent): shareholders' investment and retained earnings Assets = Liabilities + Equity

9. A statement showing a company’s assets and liabilities. Assets will ALWAYS equal liabilities +Equity

10. Balance Sheet Versus Income Statements and Cash Flow Forecast A balance sheet represents a company's financial position for one day at its fiscal year end That is - the last day of the accounting period (What is this in the UAE?) However the income statement and cash flow statements reflect a company's operations for its whole fiscal or financial year - 365 days. So The balance sheet is like a photographic snapshot and the income/cash flow statements is like a movie Therefore it is more accurate, for the particular day you are observing the Balance Sheet.

11. Exam Questions 1.Identify one asset and one liability that Kelloggs’ (breakfast cereals) might have. (2) 2.SNOWBALL Answers

12. Key Terms Fixed assets or Non – Current Assets Current assets Debtors Current liabilities Creditor Long term liabilities