1. How Accountants Use Balance Sheets  Account Form Report Form heading ASSETSLiabilities and Capital HEADINGS Assets Liabilities and Capital

2. Classified Balance Sheet  A classified balance sheet has the data grouped according to major categories  Current Assets: will be converted into cash (or used up) during the next year  Fixed Assets (or plant and equipment): long-term assets held for their usefulness in producing goods or services  Current Liabilities: short-term debts, payment of which is expected to occur within one year of the date of the balance sheet  Long-term liabilities: debts of the business that are not due within one year

3. 8.3 Classified Balance Sheet  Cont…  Capital –the owner’s claim on assets Beginning balance Increase or decrease through profit or loss Decrease through owner withdrawals (drawings/dividends) Ending Balance  Inner columns  The two balancing totals: total assets and total liabilities plus owners equity

4. Working Capital  Working Capital  The difference between the current assets and the current liabilities of a business Obviously the more working capital there is, the better off a business is.

5. Comparative Financial Statement  A comparative financial statement presents figures for successive years in side-by-side columns (in the same way that the income statement does) see page 272 in your textbook  Look for items showing unusual change – relate items to each other  example, if sales is going up why is bank loan also increasing?  If advertising is increased why isn't equity?

6. Trend Analysis APOLLO PRINTING WORKING CAPITAL 1998 to 2002 19981999200020012002 $19 626$18 993$20 584$16 761$19 970 100%97%105%85%102%

7. Common-Size Statements  On the income statement every figure is expressed as a percentage of sales  Therefore if rent expense is 46 percent, we know that for each dollar of sales 46 cents go to rent expense  For common-sized balance sheets every figure is expressed as a percentage of TOTAL ASSETS  Therefore we divide every number by the total assets *very useful for companies of different sizes