1. CHAPTER 9
THE BALANCE SHEET

2. Outline The Balance Sheet Balance Sheet Formats
The Classified Balance Sheet
Assets
Liabilities
Shareholders’ Equity
Statement of Retained Earnings

3. The Balance Sheet A basic financial statement
Reports the financial status of a company at a point in time
Includes assets, liabilities and shareholders’ equity accounts
A classified balance sheet provides users useful information concerning the firm’s financial position of the company

4. Balance Sheet Formats
Account Format (the two parts are presented side by side)
Report Format (the two sides are presented one under the other)

5. The Classified Balance Sheet
ASSETS, LIABILITIES, AND EQUITY ACCOUNTS
ARE CLASSIFIED INTO ACCOUNT CATEGORIES
Assets
Liabilities
Current Liabilities
Current Assets
Long-term Liabilities
Property and Equipment
Other
Other Assets

6. Marketable securities
Current Assets
Cash and other items that can be converted into cash or consumed by the business within one year from the balance sheet date, such as:
Cash
Marketable securities
Accounts Receivable
Inventories
Prepaid expenses

7. Assets Current assets Cash Marketable securities
Hospitality Sample Firm Co., Inc.
Balance Sheet
December 31, 2007
In thousands of dollars
Assets
Current assets
Cash
Marketable securities
Accounts receivable, less allowance
for doubtful accounts of $420
Inventories
Prepaid expenses
Total current assets
$4,080
600
2,060
2,200
1,300
$10,240

8. PROPERTY AND EQUIPMENT Assets used in operations to produce revenues
Land
Buildings
Furniture, fixtures, and equipment
Total property and equipment
Less: accumulated depreciation
Net property and equipment
$16,800
73,000
20,100
109,900
14,100
$95,800

9. OTHER ASSETS
Items with a future value which are not used in operations
Intangible assets: Goodwill, trademarks, patents, pre-opening expenses
Long-term investments: Investments in subsidiaries & restricted cash
Long-term receivables
Cash surrender value of officer’s life insurance

10. Liabilities Current Liabilities Accounts payable
Due within one year from balance sheet date
Accounts payable
Accrued Expenses-Interest, Salaries
Current portion of long-term debt
Notes Payable
Income Tax Payable

11. CURRENT LIABILITIES Current liabilities
Current portion of long-term debt
Account payable
Income taxes payable
Accrued expenses
Total Current liabilities
$ ,000
1,400
200
1,800
$6,400

12. Mortgages Payable (net of current portion)
Long Term Liabilities
Due after one year from balance sheet date
Mortgages Payable (net of current portion)
Bonds Payable
Notes Payable

13. Shareholder’s Equity Preferred Stock Common Stock Retained Earnings
Treasury Stock

14. Shareholders’ Equity Common Stock Preferred Stock
Preferred shareholders have preferences on earnings and upon liquidation.
No voting rights
Preset dividend rate
Preferred Stock
Ownership in Corp.
Voting rights
Potential dividends
Last to receive, in the event of bankruptcy of Corp.

15. RETAINED EARNINGS
Accumulated net income that has not been distributed in the form of dividends
Separate statement of retained earnings indicates changes in retained earnings balance since previous period, due to existence of net income and dividends paid out (if any).

16. TREASURY STOCK Stock re-acquired by the company
Reduces number of shares outstanding
Deduction from shareholders’ equity
Shown on balance sheet as a NEGATIVE value

17. Shareholders’ Equity Common Stock $3,650
Additional Paid in Capital ,100
Retained Earnings ,140
Less: Treasury Stock (1,000)
Total Shareholders’ Equity $8,890