1. L.O To construct a balance sheet with information given

2. BALANCE SHEET
Items that are owned by the business or owed to the business
The balance sheet is a financial statement which shows the assets, liabilities and capital of a business on a particular date.
Is the money invested by the owners
Is the amount owed by the business

3. The employee’s details
The balance sheet shows the financial health of the business, as well as.....
Assets & Liabilities
The Manager’s name
Liabilities & Capital
How much profit
Assets & Capital
The employee’s details
The flow of cash
Assets, Liabilities & Capital 4

4. As soon as the balance sheet is produced it is....
Thrown in the bin
Given to every employee
Done again
Laminated
Put on weighing scales
Sent to the government
Sold to the public
Out of date 6

5. All stakeholders will be interested in the balance sheet, especially....
Local Community
The environment
Your mum
Mr Fletcher
Competitors
The government
Suppliers 8
Shareholders

6. Items owned by the business, or owed to the business
Assets
Current Liabilities
Liabilities
Fixed Assets
Capital
Buildings
Current Assets
Money 1

7. Money invested by the owners is.....
Profit
Assets
A wise investment
Liability
Converted in to stock
A stupid idea
Put in the bank account
Capital 3

8. Items owed by the business are....
Assets
Debt
Debtors
Capital
Don’t know
Creditors
Fixed Assets 7
Liabilities

9. Why produce a balance sheet?
It shows the owner what their investment has been used for and gives an idea of what the business is worth.
Shows the financial health of a business.
It shows where the money has come from and what it has been spent on.

10. Assets – Items owned by the business or owed to the business.
Fixed Assets –
Items kept longer than 1 year. Buildings / Vehicles / equipment
Current Assets –
Items kept less than 1 year
Stock / Debtors / Cash in hand

11. Liabilities – Amounts owed by the business
Current liabilities
Liabilities due to be repaid in less than one year
Long-term liabilities
Liabilities due to be repaid over more than one year
Capital – Money invested by the owner of a business

12. A loan / a liability / the money you owe
How does a balance sheet balance?
£10
A loan / a liability / the money you owe
£10

13. How does a balance sheet balance?
Assets
Liabilities
£7,000
£3,000
Total £10,000
Bank Loan £2,000
Capital £8,000
Total £10,000
Assets
Liabilities
£7,000
£3,000
Total £10,000

14. How does a balance sheet balance?
Capital £8,000
Total £8,000
Assets
Computers £7,000
Furniture £3,000
Total £10,000
minus liabilities
Bank loan £2,000
total £8,000
Assets
Computers £7,000
Furniture £3,000
Total £10,000
minus liabilities
Bank loan £2,000
total £8,000

15. BALANCE SHEET (TOP)

16. BALANCE SHEET (TOP)

17. BALANCE SHEET (BOTTOM)

18. Create a balance sheet using the information below for
Now your turn
Create a balance sheet using the information below for
‘MADE UP COMPANY LTD’
Premises - £100,000
Creditors - £50,000
Equipment - £ 20,000
Cash in bank - £20,000
Profit & Loss (Net profit) - £30,000
Debtors - £10,000
Stock - £5,000
Share capital - £65,000
Reserves - £10,000

19. Working Capital = Current Assets – Current Liabilities
Working Capital can be calculated as follows –
Working Capital = Current Assets – Current Liabilities
Anything the business owns and intends not to have for more than 1 year (raw materials / stock / debtors / cash)
Anything the business owes which must be paid in less than a year (creditors / overdraft / dividends)

20. WORKING CAPITAL

21. Working out working capital
Working capital represents operating liquidity available to a business.
It is calculated as current assets minus current liabilities.
Working Capital = Current Assets − Current Liabilities
A company can have loads of assets and profitability but short of liquidity if its assets cannot readily be converted into cash.
Positive working capital is required to ensure that a firm is able to continue its operations and that it has sufficient funds to satisfy both maturing short-term debt and upcoming operational expenses.

22. Capital Employed
Capital employed is the value of the assets that contribute to a company’s ability to generate revenue
Fixed assets + current assets – current liabilities

23. Balance Sheet 1 Fixed assets £ Buildings 60,000 Equipment 20,000
Total fixed assets 80,000
Current assets
Stock 20,000
Debtors 10,000
Cash in bank 10,000
Total current assets 40,000
(Total assets = £120,000)

24. Balance Sheet 2 LIABILITIES £ liabilities Creditors -10,000
Total assets less liabilities 110,000
(This is the total assets - £120,000 - minus the liabilities)

25. Balance Sheet 3 Capital and reserves £ Share capital 70,000
Profit and loss account 10,000
Shareholders’ funds 110,000
(This is the total amount in capital and reserves. It must equal the same amount as the total assets minus liabilities)

26. Balance Sheet ASSETS Fixed assets (assets listed)
Total fixed assets £80,000 A
Current assets (assets listed)
Total current assets £40,000 B
LIABILITIES
Current liabilities –£10,000 C
Total assets less current liabilities
(Net assets) £110,000 A + B – C
______________________________________________________
Capital and reserves (all listed)
Shareholders’ funds £110,000 D

27. Advantages of using ICT
Spreadsheets can be used to compile profit and loss accounts, formulae can be used to perform any calculations
The spreadsheet template can be used again and again
Advantages include speed, accuracy, instant access to information
The spreadsheet can be used to create graphs

28. Disadvantages of using ICT
Setting up the original template can be time-consuming
If the formula are incorrect then the final accounts will be wrong
Spreadsheet files can be easily deleted, and open to abuse.