The Balance Sheet (B/S)

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Presentation transcript:

The Balance Sheet (B/S) Final Accounts The Balance Sheet (B/S)

What is it? The B/S shows what a business is worth at precise point in time. It is what is known as a ‘snap shot’ of the business’s financial position at a particular point in time.

What is in a B/S The B/S is made up of three parts: Assets (Fixed and Current) - This is what the business owns Liabilities (Current and Long-term) - This is what the business owes Capital Money which the owner has put into the business.

B/S formulae (top half of B/S) This is done to work out the Net assets of the business Current assets – Current liabilities = Working capital (net current assets) Fixed Assets + Working capital = Net assets

Bottom half of B/S This is done to work out where the money has come from. Shareholders’ funds + Reserves + Retained profit + Long term liabilities (usually a bank loan) = total capital employed

Why is it called a ‘Balance Sheet’ Both halves of the B/S have to ‘balance’. The top half is what the business has spent its’ money on and the bottom half is where it has come from. This is the proof that the organisation has gathered its’ funds legally (or not!)

Classwork Using the B/S on page 162 as a guide, carry out the extension task on page 163 Go to the following link and find a B/S for a company that you are in interested in. http://www.bized.co.uk/cgi-bin/ratios/ratiodata.pl Analyse the figures and provide a short report on the company’s performance. Compare it to Fitness First Ltd (the company you did for the extension task). Who, in your opinion, appears the stronger, better organised company?

Revision Click on the link below and take the GCSE Bitesize quiz on P/L Accounts and the B/S.