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Balance Sheet A balance sheet is one of the three annual financial statements that companies are legally required to produce for auditing purposes. It.

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Presentation on theme: "Balance Sheet A balance sheet is one of the three annual financial statements that companies are legally required to produce for auditing purposes. It."— Presentation transcript:

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2 Balance Sheet A balance sheet is one of the three annual financial statements that companies are legally required to produce for auditing purposes. It is a record of an organization’s financial position at a specific date, usually the end of the trading year A balance sheet must contain 3 essential parts: assets, liabilities and capital and reserves

3 Assets Assets are items owned by or owed to a business and hold a monetary value, such as cash or buildings. Assets can be classified as: Current assets and Fixed assets

4 Fixed Assets A fixed asset is any asset that is purchased for a business use, rather than for selling, and is likely to last for more than 12 months from the balance sheet date There are 3 groups: Tangible Intangible Investments

5 Tangible Fixed Assets Equipment, machinery property (land and buildings), and motor vehicles. Tangible assets tends to depreciate ( fall in value) over time

6 Intangible Assets These are non-physical fixed assets such as brand names, trademarks, copyrights and patents.

7 Investments These are medium to long term financial investments that the business has. Businesses can hold shares and debentures in other companies.

8 Current Asset Refers to cash or any other liquid asset that is likely to be turned into cash within 12 months of the balance sheet date

9 Liabilities A liability is a legal obligation of a business to repay its lenders or suppliers at a later date Long-term liabilities: are debts that are due to be repaid after 12 months ex: debentures, mortgages and bank loans. In the balance sheet, we call: Accounts payable: amounts falling due within one year Current Liabilities: are debts that must be paid within 1 year of the balance sheet date. In the Balance sheet, we call : Creditors: amounts falling due within one year

10 Capital and reserves Share capital: refers to the amount of money raised through the sale of shares Retained profit: is the amount of the net profit after interest, tax and dividends have been paid Reserves: will record any proceeds from retained profits in previous trading years. It may also include capital gains in the value of fixed assets

11 BALANCE SHEET EXERCISES EXCEL MODEL CASE


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