Balance SheetA 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

AssetsAssets 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

Fixed AssetsA 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:TangibleIntangibleInvestments

Tangible Fixed AssetsEquipment, machinery property (land and

buildings), and motor vehicles.Tangible assets tends to depreciate ( fall in

value) over time

Intangible AssetsThese are non-physical fixed assets such as

brand names, trademarks, copyrights and patents.

InvestmentsThese are medium to long term financial

investments that the business has.Businesses can hold shares and debentures in

other companies.

Current AssetRefers to cash or any other liquid asset that

is likely to be turned into cash within 12 months of the balance sheet date

LiabilitiesA liability is a legal obligation of a business to

repay its lenders or suppliers at a later dateLong-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

Capital and reservesShare capital: refers to the amount of

money raised through the sale of sharesRetained 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

BALANCE SHEETEXERCISES EXCELMODELCASE