1. { Balance Sheet Two fold effect

2. Assets = Liabilities + Owner’s Equity The accounting equation

3. The resources controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity. Assets

4. Items  the business owns / controls,  will provide money / economic benefit for the business e.g. Debtors,  that can be touched and  will be owned by the business for longer than one month and maybe for many years e.g. buildings. Cash in Bank, Debtors, Stock, GST Refund, Equipment, Buildings, Vehicle, Computer. Assets

5. Present obligations of the entity arising from past events the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits. Liabilities

6.  Items that  are owed to someone outside the business / an outflow of economic benefits,  must be paid / settlement and  will be owed by the business for longer than one month and may be longer e.g. 5 year loan. Creditors, loans, mortgages, GST Payable. Liabilities

7. Assets – Liabilities Owner’s Equity

8. Assets must equal Liabilities plus Owner’s Equity

9. What is owned must equal what is owed outside the business & what is owed to the owner

10. The Balance Sheet is a representation of The Accounting Equation

15. Chino’s on Victoria Balance Sheet as at 19 th November 2014 Current Assets Owned Cash at Bank StockDebtors GST Refund Non Current Assets Equipment Motor Vehicle Current Liabilities Owed Creditors GST Payable Non Current Liabilities Loan Owner’s Equity Capital The total values of the items on this side must equal the total values of the items on this side

16. Every transactions (purchase of stock or receipt of sales) changes the Balance Sheet. The net effect will change two items in the Balance Sheet. Two fold effect

17. Can be prepared in a number of ways The Balance Sheet

18. Owner’s Equity Capital, Monica30,000 Represented by Assets Stock of Garments 4,000 Cash 9,000 Office Assets25,000 Total Assets38,000 Less Liabilities Loan, Bank of Melbourne 8,000 Equals Net Assets (A-L)30,000 Monica’s Fashions Balance Sheet as at 1/10/07

19. AssetsLiabilitiesOwner’s Equity Stock 4000Loan8000Capital30000 Cash 9000 Office Assets 25000 TOTAL38000TOTAL8000TOTAL30000 The accounting equation as at 1/10/07

20. AssetsLiabilitiesOwner’s Equity Stock 7000Loan8000Capital30000 Cash 5700 Office Assets 25000 GST Refund 300 TOTAL38000TOTAL8000TOTAL30000 2-Oct Bought more stock for $3,300 Cash including $300 GST

21. AssetsLiabilitiesOwner’s Equity Stock 7000Loan5000Capital30000 Cash 2700 Office Assets 25000 GST Refund 300 TOTAL35000TOTAL5000TOTAL30000 3-Oct Paid $3,000 off the loan

22. AssetsLiabilitiesOwner’s Equity Stock 7000Loan5000Capital30000 Cash 500 Office Assets 27000 GST Refund 500 TOTAL35000TOTAL5000TOTAL30000 4-Oct Bought more office assets for cash $2,200 including $200 GST

23. AssetsLiabilitiesOwner’s Equity Stock 8000Loan5000Capital31000 Cash 500 Office Assets 27000 GST Refund 500 TOTAL36000TOTAL5000TOTAL31000 5-Oct Owner contributed personal stock worth $1,000 to the business.

24. AssetsLiabilitiesOwner’s Equity Stock 8000Loan12000Capital31000 Cash 7500 Office Assets 27000 GST Refund 500 TOTAL43000TOTAL12000TOTAL31000 5-Oct Borrowed another $7,000 from the Bank of Melbourne - loan.

25. Owner’s Equity Capital, Monica31,000 Represented by Assets Stock of Garments 8,000 Cash 7,500 Office Assets27,000 Total Assets43,000 Less Liabilities Loan, Bank of Melbourne12,000 Equals Net Assets (A-L)31,000 Monica’s Fashions Balance Sheet as at 5/10/07

26. Rita’s Saddlery & Horse Supplies

27. Owner’s Equity Capital, Rita31,000 Represented by Assets Cash 2,000 Stock11,000 Office Assets25,000 Horse Float 9,000 Total Assets47,000 Less Liabilities Loan, ANZ16,000 Equals Net Assets (A-L)31,000 Saddlery & Horse Supplies Balance Sheet as at 1/12/08

28. AssetsLiabilitiesOwner’s Equity Cash 0Loan – ANZ14000Capital31000 Stock 11000Overdraft 0 Office Assets 25000 Horse Float 9000 TOTAL45000TOTAL14000TOTAL31000 1-Dec Paid $2,000 off the ANZ Loan.

29. AssetsLiabilitiesOwner’s Equity Cash 0Loan – ANZ14000Capital31000 Stock 16000Overdraft 5500 Office Assets 25000 Horse Float 9000 GST Refund 500 TOTAL50500TOTAL19500TOTAL31000 2-Dec Bought more stock for $5,500 cash including $500 GST.

30. AssetsLiabilitiesOwner’s Equity Cash 0Loan – ANZ14000Capital31000 Stock 16000Overdraft 9900 Office Assets 29000 Horse Float 9000 GST Refund 900 TOTAL54900TOTAL23900TOTAL31000 3-Dec Bought more office assets for cash, $4,400 including $400 GST.

31. AssetsLiabilitiesOwner’s Equity Cash 0Loan – ANZ14000Capital33000 Stock 18000Overdraft 9900 Office Assets 29000 Horse Float 9000 GST Refund 900 TOTAL56900TOTAL23900TOTAL33000 4-Dec Contributes personal saddle (stock) to business worth $2,000.

32. AssetsLiabilitiesOwner’s Equity Cash 0Loan – ANZ11000Capital33000 Stock 18000Overdraft12900 Office Assets 29000 Horse Float 9000 GST Refund 900 TOTAL56900TOTAL23900TOTAL33000 5-Dec Paid $3,000 off ANZ loan.

33. AssetsLiabilitiesOwner’s Equity Cash 0Loan – ANZ11000Capital43000 Stock 18000Overdraft 2900 Office Assets 29000 Horse Float 9000 GST Refund 900 TOTAL56900TOTAL13900TOTAL43000 6-Dec The owner injects $10,000 cash into the business from her own resources.

34. AssetsLiabilitiesOwner’s Equity Cash 0Loan – ANZ33000Capital43000 Stock 18000Overdraft 2900 Office Assets 29000 Horse Float29000 GST Refund 2900 TOTAL78900TOTAL35900TOTAL43000 7-Dec Borrowed more to buy another horse float for $22,000 incl. $2,000 GST

35. Start Chapter 2 Exercises