Chapter 9 Accounting Preparing Financial Statements Balance Sheet

Chapter 9: Accounting Preparing Financial Statements – Balance Sheet 1

Preparing Financial Statements – Balance Sheet Preparing a Balance Sheet The balance sheet shows the financial position on any given day of the business, and provides information about its assets, liabilities, and equity. Balance Sheet Equation Method The balance sheet gets its name because the left side of the equation (assets) always equals the right side (liabilities plus owner’s equity). Assets are owned by one of two groups 1. owner(s) of the business (owner’s equity) 2. individuals or businesses owed money (liabilities) 2

Preparing Financial Statements – Balance Sheet Steps in preparing the balance sheet: Step 1: Fill in the Statement Headings: company name/financial statement name/date of completion Mark’s Repair Shop Balance Sheet October 30, 2015 3

Preparing Financial Statements – Balance Sheet Steps in preparing the balance sheet: Step 2: List the Asset: Assets are listed in order to how easily they can be converted into cash (liquidity). Assets Cash Accounts Receivable Supplies Parts Inventory Equipment Building and Land Total Assets $6 500 8 100 500 4 000 25 500 175 000 $219 600 4

Preparing Financial Statements – Balance Sheet Steps in preparing the balance sheet: Step 3: List the Liabilities: Liabilities are listed in order by the date they must be repaid (maturity date). From earliest to latest. Liabilities Accounts Payable $7 350 Bank Loan 11 050 Mortgage Payable Total Liabilities 110 000 $128 400 5

Preparing Financial Statements – Balance Sheet Steps in preparing the balance sheet: Step 4: Calculate Owner’s Equity: Total Assets – Total Liabilities = Owner’s Equity Mark Blanchet, Equity $ 91 200 (Owner’s Equity = Total Assets $219 600 – Total Liabilities $128 400) 6

Preparing Financial Statements – Balance Sheet Steps in preparing the balance sheet: Step 5: PUT IT ALL TOGETHER!! 7

Preparing Financial Statements – Balance Sheet Mark’s Repair Shop Step 2 List Assets Balance Sheet September 30, 2015 Assets Step 3 List Liabilities Cash $6 500 Accounts Receivable 8 100 Supplies 500 Parts Inventory 4 000 Equipment Accounts Payable $7 350 Bank Loan 11 050 Mortgage Payable Total Liabilities _____110 000 $ 128 400 25 500 Building and Land 175 000 Owner’s Equity Mark Blanchet, Equity $ 91 200 Total Liabilities and Total Assets $ 219 600 Owner’s Equity $ 8 219 600 Step 4 Calculate Owner’s Equity Step 5: Step 1 Statement Headings