1. Example Exercise 1-6 Balance Sheet
Example Exercise 1-6 examines how to prepare a balance sheet. It reports the balances of the assets, liabilities and stockholders’ equity accounts. Using the data provided in Example Exercises 1-5 and 1-6, we walk you through how to [CLICK] prepare a balance sheet as of April 30, 2012. 1

2. CHICKADEE TRAVEL SERVICE
Example Exercise 1-6
CHICKADEE TRAVEL SERVICE
Balance Sheet
April 30, 2012
To prepare this statement, first we create a title which provides the following information: 1) the name of the company; 2) the name of the financial statement; and 3) the date which represents the last day of the period for which the financial statement is prepared. 2

3. CHICKADEE TRAVEL SERVICE5
Example Exercise 1-6
CHICKADEE TRAVEL SERVICE
Balance Sheet
April 30, 2012
Assets Liabilities
Cash $ 53,050
Using a “T” account format, first we will post all the asset account balances. The normal balance of an asset account is a debit, where assets are listed from those most liquid, like cash, to those that would take time to liquidate, like Land. The Cash balance is $53,050 [CLICK].

4. CHICKADEE TRAVEL SERVICE
Example Exercise 1-6
CHICKADEE TRAVEL SERVICE
Balance Sheet
April 30, 2012
Assets Liabilities
Cash $ 53,050
Accounts receivable 31,350
Accounts Receivable is another current asset balance of many companies’ general ledger. As an asset, Accounts Receivable has a debit balance of $31,350. [CLICK]

5. CHICKADEE TRAVEL SERVICE
Example Exercise 1-6
CHICKADEE TRAVEL SERVICE
Balance Sheet
April 30, 2012
Assets Liabilities
Cash $ 53,050
Accounts receivable 31,350
Supplies 3,350
Land ,000
The last two asset accounts for Chickadee are Supplies and Land. Remember that they are listed from most liquid to least liquid. So Supplies with a balance of $3,350 [CLICK] is listed after Accounts Receivable, which is followed by Land with a balance of $80,000 [CLICK].

6. CHICKADEE TRAVEL SERVICE
Example Exercise 1-6
CHICKADEE TRAVEL SERVICE
Balance Sheet
April 30, 2012
Assets Liabilities
Cash $ 53,050
Accounts receivable 31,350
Supplies 3,350
Land ,000
Accounts payable $ 12,200
The normal balance for liability accounts is a credit. As with assets, liabilities are listed from those most liquid. Therefore, Accounts Payable is listed before Notes Payable. Chickadee only has one liability, Accounts Payable. The balance is $12,200 [CLICK].

7. CHICKADEE TRAVEL SERVICE
Example Exercise 1-6
CHICKADEE TRAVEL SERVICE
Balance Sheet
April 30, 2012
Assets Liabilities
Cash $ 53,050
Accounts receivable 31,350
Supplies 3,350
Land ,000
Accounts payable $ 12,200
Stockholders’ Equity
Capital stock $100,000
There are two accounts that affect Chickadee Travel Service’s stockholders’ equity section [CLICK]. The first item is Capital Stock [CLICK].

8. Example Exercise 1-6
To refresh our memory, here is Follow My Example 1-5. Note that the ending Retained Earnings balance is $55,550 [CLICK]. Let’s insert this amount onto the balance sheet. 8

9. CHICKADEE TRAVEL SERVICE
Example Exercise 1-6
CHICKADEE TRAVEL SERVICE
Balance Sheet
April 30, 2012
Assets Liabilities
Cash $ 53,050
Accounts receivable 31,350
Supplies 3,350
Land ,000
Accounts payable $ 12,200
Stockholders’ Equity
Capital stock $100,000
Retained earn ,550
Now, total stockholders’ equity is [CLICK] $155,550.
Total stockholders’ equity
155,550

10. CHICKADEE TRAVEL SERVICE5
Example Exercise 1-6
CHICKADEE TRAVEL SERVICE
Balance Sheet
April 30, 2012
Assets Liabilities
Cash $ 53,050
Accounts receivable 31,350
Supplies 3,350
Land ,000
Accounts payable $ 12,200
Stockholders’ Equity
Capital stock $100,000
Retained earn ,550
The balance sheet is said to be “balanced” when total assets are equal to the total liabilities and stockholders’ equity. This is a good illustration of the accounting equation and its relationship to the balance sheet.
Total stockholders’ equity 155,550
Total liabilities and
Total assets $167,750 stockholders’ equity $167,750

11. Example Exercise 1-6 Follow My Example 1-3
Example Exercise 1-6 (continued)
Follow My Example 1-3
Having seen how to construct a balance sheet, refer to Practice Exercises PE 1-6A and PE 1-6B to practice the preparation of a balance sheet.
 For Practice: PE 1-6A, PE 1-6B