1. Unit 3 Accounts & Finance Financial Accounts

2. Learning Objectives To be able to construct and ammend accounts from information given To identify and understand the main components of a balance sheet

3. Key Terms Assets – items of monetary value that are owned by a business Liabilities – Financial obligation of a business that it is required to pay in the future Shareholders’ equity – total value of assets LESS total value of liabilities Share capital – Total value of capital raised from shareholders by the issue of shares

4. Debtors & Creditors Debtors – Owe the company money Creditors – The company owes money

5. Balance Sheet Accounting statement that records the values of a business’s assets, liabilities and shareholders’ equity (net wealth) at one point in time Aim of most businesses is to increase shareholders’ equity by raising the value of the business’s assets more than any increase in the value of the business’s liabilities

6. Shareholders’ Equity Comes from 2 main sources Companies have to publish income statement and balance sheet for the previous financial year Balance sheet is a statement of the estimated value of the company at one moment in time – End of the financial year First and original source was the capital originally invested in the company through the purchase of shares, share capital Reatined earningsof the company accumalted over time through its operations

7. The Key is “a balance sheet must balance” Fixed Assets + Net current assets = long-term Liabilities + Capital invested (net current assets = current assets – current liabilities) Note: the capital invested (including the owners investment) is on the same side as liabilities because it still belongs to the investor not the company

8. Example balance sheet See excel document for balance sheet and word document for break down of key terms in the balance sheet Figures sometimes presented in 2 columns for Business Studies courses but in actual published accounts they are presented in one column

10. CASH