1. The Balance Sheet

2. What is it used for? Finding out how much a person, business, or organization is worth. This is called FINANCIAL POSITION.

3. Financial Position What things do we need to list? Assets Liabilities

4. Financial Position (Assets) Let’s look at the financial situation for Mike. Here is everything he owns. Cash$54.50 Bank balance246.00 Canada Savings Bond 2500.00 Bicycle629.00 Snowboard650.00 Computer1900.00 Phone700.00 Clothes2700.00 Total Assets$?????

5. Financial Position (Liabilities) Here is everything he owes or that costs money. Owed to Jack$54.50 Owed to father246.00 Owed to Mr. Wood for a high mark. 3000.00 Phone Bill84.95 Total Liabilities$?????

6. The Fundamental Accounting Equation Assets – Liabilities = Owner’s Equity More useful than that is: Assets = Liabilities + Owner’s Equity Let’s use this on Mike’s situation:

7. Mike’s Financial Situation Assets ($?????) – Liabilities ($?????) = Equity ($?????) Assets ($?????) = Liabilities ($?????) + Equity ($?????)

8. Quick review How do we calculate a person’s financial position? What is an asset? What is a liability? Define equity. What is another term that means the same thing as equity? What are the two forms of the accounting equation?

9. Exercises Say asset or liability: -Office furniture -Land -Bank Loan -House and lot -Unpaid heating bill -An amount loaned to Ms. Smith -Mortgage payable -Car -Bank deposit

10. Claude Pineau needs help figuring out what he is worth. He has $3650 in the bank, his house is worth 492,000, with 162,360 left on the mortgage. He owns $55,000 worth of furniture. Has a summer house worth 225,000 with 145,000 left on the mortgage. $4200 in unpaid bills Owes his dad $50,000.

11. The Balance Sheet

12. Features of the Balance sheet In Order Of liquidity In Order Of Usual payment Same line, double underlined

13. Features of the balance sheet Mortgages are detailed. $500,000 house $200,000 paid off =$300,000 left. These are listed seperately.

14. Accounts Receivable/Payable Accounts Receivable: These are debts TO your business, owed by customers. Why do we list them? Accounts Payable: Debts OF your business, to suppliers. Why do we list these? Companies owed money by OUR business are called creditors. We will come back to this later.

15. Accounts Receivable/Payable

16. Finishing up a Balance Sheet

17. Recordkeeping Practices Be careful abbreviating. Here is an example of when abbreviations should be used.Here You can use BMW, because they go by that officially. However, you would have to fully list Fulford Preparatory College. Canadian Electric Company cannot be abbreviated to Can. at the beginning, or Co. at the end. “Ltd.” or “Corp.” or “Inc.” stay that way.

18. Using Columnar Paper

19. BE NEAT!!!!!

20. Review Questions 1. What is a balance sheet? 2. Where does the name of a business appear in the heading of a balance sheet? 3. What side of the sheet do you find liabilities? 4. How is a car not fully paid for show up on the balance sheet? 5. What side of the balance sheet do creditors appear?

21. Review Questions 6. What does a single line under a column mean? 7. Why do we have to be neat on balance sheets? 8. What are double lines under columns for? 9. When can you use short forms of business names? 10. What is the most “liquid asset?”

22. Assets Cash $ 1 636 Debtors Mr. Farrell 749 Ms. Lotfallah 225 Supplies 1 005 Furniture 21 500 Delivery equipment 30 000 Liabilities Creditors Ms. Smith $ 1 985 Mr. Wood 954 Bank Loan 5 000 If this company were a retailing business, there would be a line called “Merchandise inventory.” What do you think this means? What side of the balance sheet would it be on?