1. BBI1O1

2. The Balance Sheet  The formal way of presenting the financial position for a company is the balance sheet  A balance sheet is a statement showing the financial position of a person, business, or other organization

3. Balance Sheet Example

4. Features of the Balance Sheet  The Balance Sheet looks like the Fundamental Accounting Equation  A = L + OE  Assets are on the left side and the liabilities and owner’s equity are on the right side

5. Features of the Balance Sheet  A Three Line Heading is Used  WHO? – The name of the individual, business or other organization  WHAT? – The name of the financial statement (in this case the balance sheet)  WHEN? – The date on which the financial position is determined

6. Features of the Balance Sheet  The assets are listed in order of their liquidity  Liquidity means the order in which the assets are converted into cash  Cash on hand, bank balances are first, whereas equipment & building are listed later (they are normally not converted to cash, but used in business operations)

7. Look at the Order of Liquidity

8. Features of the Balance Sheet  The liabilities are generally listed in the order in which they are normally paid  The two final totals are listed on the same line on the balance sheet and are underlined with a double line

9. Accounts Receivable  Customers of the business will often buy goods or services with the understanding that they will be paid for in the future  These debts owed represent a dollar value to the business, so the business has a right to include them among the assets on the balance sheet  Each of these customers that owes money to the business is one of its debtors

10. Accounts Payable  A business often purchases goods and services from its suppliers with the understanding that payment will be made later  These debts to suppliers represent an obligation of the business, so the business must include them among its liabilities  Each of the suppliers owed money by the business is one of its creditors