1. Introduction to the Balance Sheet
What is Net Worth?

2. The Accounting Equation
The foundation of the balance sheet is included in the following equation
Here it is:
A = L + OE
Also known as Assets = Liabilities + Owners Equity

3. The Accounting Equation
Reviewing that terminology
Assets – item of value owned by a business or person
Liability – the debts of a business or person
Owner’s Equity – the owner’s claim against the assets or value of the business or
How much of the assets the business actually owns.

4. The Accounting Equation= +
House
Mortgage
Down Payment
(Asset)
(Liability)
(Owner’s Equity)

5. The Balance Sheet Joe’s Diner Balance Sheet December 31, 2011 Assets
Cash 4,000
Accounts Receivable 5,000
Inventory 3,000
Furniture 15,000
Equipment 10,000
Automobile 20,000
Total Assets 57,000
Liabilities Credit Card Debt 2,000 Bank Loan 10,000 Total Liabilities 12,000
Personal Equity J. Chari, Capital 45,000 Total Liabilities and Owner’s Equity 57,000

6. The Heading
Headings for all accounting statements are similar, as in they always are listed in the same order
Who? Company Name
What? Which type of statement
When? The date that its representing
The Balance Sheet is not any different

7. Asset Classification Assets are broken up into 2 different categories
Short-term or current assets
Fixed or long-term assets
Current assets are those that the business expects to be used up within 1 years time
Fixed assets are those that are expected to last for longer than 1 year

8. Order of Liabilities Liabilities are also split into 2 categories
Current liabilities – less than 1 year
Long-term liabilities – more than 1 year
Liabilities are listed in “maturity order”, meaning that the liability that is due in the shortest amount of time is listed first and so forth

9. Owner’s Equity Owner’s Equity is always listed as follows
First Initial . Last name, Capital
C. Bourne, Capital

10. Facts to Remember Only the totals should be double- underlined
The statement should contain no corrections
No abbreviations should be used in a statement
A single line indicates addition or subtraction
All accounts are to be capitalized
Columns and rows need to be aligned for aesthetic reasons

11. Common Accounts
Current Assets – Cash, Accounts Receivable, Office Supplies
Fixed Assets – Land, Building, Equipment, Automobile, Truck
Current Liabilities – Accounts Payable, Notes Payable
Long-term Liabilities – Bank Loan, Mortgage Payable