ICT 2641 Chapter 3 Explanation of Balance Sheet

ICT 2641: Chapter 3: Explanation of Balance Sheet

What is a Balance Sheet? • Indicates business value : the 2 “O’s” – What business owns (+) – What the business owes (-) Total Cash in = Total Cash out

What is required to understand this presentation? Please print out the document under additional material: ICT 2641_Example_of_Question. pdf ICT 2641_PP_Balance_Sheet Presentation. ppt (this is a printout of the slides used in the presentation)

CASH IN? Owners contribution (e. g. inheritance, saving, pension money) R 3 400 000 + Investors, loans (bank @ certain interest rate) R 900 000 @ 15% interest = TOTAL CASH IN (R 4 300 000)

CASH OUT? Consists of Total Assets Managed: 1. Fixed assets (buildings purchased by owner) R 2 500 000) + 2. Equipment and stock (raw materials) R 5 800 000 3. Money owned to suppliers of stock R 4 000 4. Total Cash Out = R 4 300 000 TOTAL CASH OUT MUST BALANCE WITH TOTAL CASH IN! 69 to 71 in TL 201 See page

The following figures were taken from the statements of Balance Sheet based on data provided on lefthandside Sharp Shooter Air Rifle Manufacturers: Cash Resources In: Owner’s equity R 3 400 000 Owners (Equity) Long-term loans R 3 400 000 R 900 000 Lenders (Loans) 900 000 @ 15% interest -------------Current liabilities (creditors R 4 000 Total Cash In 4 300 000 plus overdraft) Fixed assets (land, buildings, R 2 500 000 Productivity Capacity : plant and equipment) Current assets (stock plus R 5 800 000 Fixed assets 2 500 000 R 4 200 000 Raw Material & Work in 5 800 000 debtors) Annual sales Process (WIP) Cost of sales Operating expenses R 2 400 000 Total Assets Managed 8 300 000 R 700 000 Cash Owed to Suppliers (4 000) Tax rate 35% Owner’s expected return on his 40% Total Cash Out investment -------------4 300 000

The following figures were taken from the statements of Balance Sheet based on data provided on lefthandside Sharp Shooter Air Rifle Manufacturers: Cash Resources In: Owner’s equity R 3 400 000 Owners (Equity) Long-term loans R 3 400 000 R 900 000 Lenders (Loans) 900 000 @ 15% interest -------------Current liabilities (creditors R 4 000 Total Cash In 4 300 000 plus overdraft) Fixed assets (land, buildings, R 2 500 000 Productivity Capacity : plant and equipment) Current assets (stock plus R 5 800 000 Fixed assets 2 500 000 R 4 200 000 Raw Material & Work in 5 800 000 debtors) Annual sales Process (WIP) Cost of sales Operating expenses R 2 400 000 Total Assets Managed 8 300 000 R 700 000 Cash Owed to Suppliers (4 000) Tax rate 35% Owner’s expected return on his 40% Total Cash Out investment -------------4 300 000

The following figures were taken from the statements of Balance Sheet based on data provided on lefthandside Sharp Shooter Air Rifle Manufacturers: Cash Resources In: Owner’s equity R 3 400 000 Owners (Equity) Long-term loans R 3 400 000 R 900 000 Lenders (Loans) 900 000 @ 15% interest -------------Current liabilities (creditors R 4 000 Total Cash In 4 300 000 plus overdraft) Fixed assets (land, buildings, R 2 500 000 Productivity Capacity : plant and equipment) Current assets (stock plus R 5 800 000 Fixed assets 2 500 000 R 4 200 000 Raw Material & Work in 5 800 000 debtors) Annual sales Process (WIP) Cost of sales Operating expenses R 2 400 000 Total Assets Managed 8 300 000 R 700 000 Cash Owed to Suppliers (4 000) Tax rate 35% Owner’s expected return on his 40% Total Cash Out investment -------------4 300 000

The following figures were taken from the statements of Balance Sheet based on data provided on lefthandside Sharp Shooter Air Rifle Manufacturers: Cash Resources In: Owner’s equity R 3 400 000 Owners (Equity) Long-term loans R 3 400 000 R 900 000 Lenders (Loans) 900 000 @ 15% interest -------------Current liabilities (creditors R 4 000 Total Cash In 4 300 000 plus overdraft) Fixed assets (land, buildings, R 2 500 000 Productivity Capacity : plant and equipment) Current assets (stock plus R 5 800 000 Fixed assets 2 500 000 R 4 200 000 Raw Material & Work in 5 800 000 debtors) Annual sales Process (WIP) Cost of sales Operating expenses R 2 400 000 Total Assets Managed 8 300 000 R 700 000 Cash Owed to Suppliers (4 000) Tax rate 35% Owner’s expected return on his 40% Total Cash Out investment -------------4 300 000

The following figures were taken from the statements of Sharp Shooter Air Rifle Manufacturers: Balance Sheet of Sharp Shooter Air Rifle Manufacturers based on data provided on lefthandside Cash Resources In: Owner’s equity R 3 400 000 Owners (Equity) Long-term loans R 3 400 000 R 900 000 Lenders (Loans) 900 000 @ 15% interest -------------Current liabilities (creditors R 4 000 Total Cash In 4 300 000 plus overdraft) Fixed assets (land, buildings, R 2 500 000 Productivity Capacity : plant and equipment) R 5 800 000 Fixed assets debtors) Annual sales R 4 200 000 Raw Material & Work in Process (WIP) Cost of sales Operating expenses 5 800 000 R 2 400 000 Total Assets Managed 8 300 000 R 700 000 Cash Owed to Suppliers (4 000) Tax rate 35% Owner’s expected return on his 40% Total Cash Out investment 2 500 000 Total Cash in = Total Cash Out Current assets (stock plus -------------4 300 000

End of the Balance Sheet Presentation. Please proceed to Income Statement Presentation.