Balance Sheets What is a balance sheet It
Balance Sheets
What is a balance sheet? It is a sheet produced at the end of a financial year stating a summary of a firms assets, liabilities and capital. • Assets being the resources owned by a business. • Liabilities being the debts of a business. • Capital being the money put into the business by the owner(s).
Here is an example of a balance sheet by a company named Kodak.
Structure The structure of Balance sheets may vary between different companies, however, they all provide of financial summary of a firm.
Equation In all balance sheets, the value of assets will equal the value of liabilities and capital. This is because all resources purchased by a business have to be financed from either capital or liabilities. Therefore; Assets = Capital + Liabilities
Current assets are assets that will be changed into cash within one year. It includes ; Stocks Debtors Cash
Current liabilities Current Liabilities are business debts which must be repaid within 12 months. They include; Trade creditors Leases and hire purchase Short term loans and overdrafts
Long term Liabilities Long term liabilities is any money owed more than one year. They may include; A mortgage A long-term loan Long-term leases and hire purchase
What for? Balance sheets are used to show the financial position of a business at a point in time. Examples may include; It shows the value of all business assets, capital and liabilities. It shows the performance of a business and its potential It shows the asset and capital structure of a business
Questions 1. 2. 3. 4. 5. What is the equation? Name one example of a Current liability Name one example of a Long Term Liability Name one example of a Current assets How does a balance sheet benefit a business?
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