© 2014 Cengage Learning. All Rights Reserved. Do Now: ●Turn & Talk: What would one use to analyze the success of a sports team at a certain time during the season, besides the win/loss record? ●What section of a financial statement would the win/loss record be equivalent to, in your opinion? SLIDE 1

© 2014 Cengage Learning. All Rights Reserved. Reading in Pairs ●Read balance sheet article ●Summarize each section of balance sheet in three bullet points ●Parking Lot: record bullet points on each section on front board ●When finished, form two teams of five to construct outline of balance sheet using accounts on cards ●Team who is correct AND fastest wins SLIDE 2

© 2014 Cengage Learning. All Rights Reserved. The Balance Sheet ASSETS SLIDE 3 LIABILITIESOWNER’S EQUITY

© 2014 Cengage Learning. All Rights Reserved. The Balance Sheet ●Reports financial information on a specific date, indicating financial condition of a business ●Also known as financial strength ●If business has adequate available assets and few liabilities, the business is financially strong ●Has four sections: Heading, Assets, Liabilities, and Owner’s Equity SLIDE 4

© 2014 Cengage Learning. All Rights Reserved. Preparing a Balance Sheet from Information on a Work Sheet ●Information needed to prepare the balance sheet is obtained from the work sheet. SLIDE 5 LO3 Lesson 7-2 Account titles are obtained from the work sheet’s Account Title column. Account balances are obtained from the work sheet’s Balance Sheet columns.

© 2014 Cengage Learning. All Rights Reserved. Heading of a Balance Sheet SLIDE 6 LO3 Lesson 7-2 Center the date of the report on the third line. 3 3 Center the name of the company on the first line. 1 1 Center the name of the report, Balance Sheet, on the second line. 2 2

© 2014 Cengage Learning. All Rights Reserved. Balance Sheet Specifics ●Reports about elements of accounting equation ASSETS = LIABILITIES + OWNER’S EQUITY ●Assets are on left side of accounting equation and left side of balance sheet ●Liabilities and Owner’s Equity are on right side of accounting equation, so they appear on the right side of the balance sheet SLIDE 7

© 2014 Cengage Learning. All Rights Reserved. Assets and Liabilities Sections of a Balance Sheet SLIDE 8 LO3 Lesson 7-2 Liabilities Total of Liabilities Assets Single Rule Total Liabilities 8 8 Account Titles Liability Amounts 6 6 Asset Amounts 3 3

© 2014 Cengage Learning. All Rights Reserved. Calculating Capital ●With Net Income: CAPITAL ACCT BALANCE + NET INCOME – DRAWING ACCOUNT BALANCE = CURRENT CAP. ●With Net Loss: CAPITAL ACCT BALANCE – NET LOSS – DRAWING ACCOUNT BALANCE = CURRENT CAPITAL SLIDE 9

© 2014 Cengage Learning. All Rights Reserved. Owner’s Equity Section of a Balance Sheet SLIDE 10 Single Rule 4 4 Compare Totals 9 9 Owner’s Equity 1 1 Account Title 2 2 Total of Assets Total Liabilities and Owner’s Equity Total Assets 5 5 Total of Liabilities and Owner’s Equity 8 8 Capital Amount 3 3 Double Rule 10 LO3 Lesson 7-2

© 2014 Cengage Learning. All Rights Reserved. Owner’s Equity Reported in Detail on a Balance Sheet SLIDE 11 Drawing 4 4 Beginning Capital 1 1 Beginning Capital Amount 2 2 Difference Ending Capital Single Rule 5 5 Total Liabilities and Owner’s Equity 9 9 Net Income 3 3 Current Capital Amount 8 8 LO3 Lesson 7-2

© 2014 Cengage Learning. All Rights Reserved. Lesson 7-2 Audit Your Understanding 1.List the four sections on a balance sheet. SLIDE 12 ANSWER Heading, assets, liabilities, and owner’s equity Lesson 7-2

© 2014 Cengage Learning. All Rights Reserved. Lesson 7-2 Audit Your Understanding 2.What is the formula for calculating current capital? SLIDE 13 ANSWER Capital Account Balance plus Net Income (or less Net Loss) less Drawing Account Balance equals Current Capital. Lesson 7-2

© 2014 Cengage Learning. All Rights Reserved. Work Time ●Similar to last class, create a question about balance sheets that someone would have to know the answer to in order to complete a balance sheet ●7-2 WT (as class) ●7-2 OYO (individually) SLIDE 14

© 2014 Cengage Learning. All Rights Reserved. With a Partner: ●Compare and contrast a company’s balance sheet OR income statement with chapter 7’s ●What are similarities? ●What are differences? ●How often do they review financial data? ●How have they been performing over time? ●Record questions you may have SLIDE 15

© 2014 Cengage Learning. All Rights Reserved. Closure ●Exit Slip: In your opinion, what is the most important information on a balance sheet that would divulge the strength of a business, similar to the statistics mentioned in the Do Now for a sports team? SLIDE 16