2. Balance Sheet A balance sheet is one of the three annual financial statements that companies are legally required to produce for auditing purposes. It is a record of an organization’s financial position at a specific date, usually the end of the trading year A balance sheet must contain 3 essential parts: assets, liabilities and capital and reserves

3. Assets Assets are items owned by or owed to a business and hold a monetary value, such as cash or buildings. Assets can be classified as: Current assets and Fixed assets

4. Fixed Assets A fixed asset is any asset that is purchased for a business use, rather than for selling, and is likely to last for more than 12 months from the balance sheet date There are 3 groups: Tangible Intangible Investments

5. Tangible Fixed Assets Equipment, machinery property (land and buildings), and motor vehicles. Tangible assets tends to depreciate ( fall in value) over time

6. Intangible Assets These are non-physical fixed assets such as brand names, trademarks, copyrights and patents.

7. Investments These are medium to long term financial investments that the business has. Businesses can hold shares and debentures in other companies.

8. Current Asset Refers to cash or any other liquid asset that is likely to be turned into cash within 12 months of the balance sheet date

9. Liabilities A liability is a legal obligation of a business to repay its lenders or suppliers at a later date Long-term liabilities: are debts that are due to be repaid after 12 months ex: debentures, mortgages and bank loans. In the balance sheet, we call: Accounts payable: amounts falling due within one year Current Liabilities: are debts that must be paid within 1 year of the balance sheet date. In the Balance sheet, we call : Creditors: amounts falling due within one year

10. Capital and reserves Share capital: refers to the amount of money raised through the sale of shares Retained profit: is the amount of the net profit after interest, tax and dividends have been paid Reserves: will record any proceeds from retained profits in previous trading years. It may also include capital gains in the value of fixed assets

11. BALANCE SHEET EXERCISES EXCEL MODEL CASE