BALANCE SHEET

Presented by

Marrium Ishaq

What is a balance sheet?

The balance sheet is a financial statement also called a ‘Position’ Statement showing the position of a business at a particular date.

A Balance sheet comprises of three items in heading:

• The name of the business

• The name of the Financial Statement

• The date of the balance sheet

The Balance sheet has three distinct sections:

• Assets

• Liabilities

• Owner’s Equity

Assets

•Assets are all those things a company owns which are of value to the business. Assets can be classified as:

• Current Assets

• Fixed Assets

CURRENT ASSETS

Current assets mean that the assets will not stay in the business for long.

Examples: Materials Debtors Petty cash

FIXED ASSETS•These are assets that the business owns.

•They are kept as a assets for several years that is why they are called fixed assets. Examples: Buildings Machinery Vehicles

Liabilities

•Liabilities are all those things for which the company eventually needs to pay. Liabilities can be classified as:

Current liabilities

Long Term Liabilities

Current Liabilities need to be paid within one accounting year.

Examples are: Outstanding rent

Accounts Payable

Long Term Liabilities are those liabilities which will not be paid during the current accounting year.

Examples are: Long term debts

OWNER’S EQUITY

Owner's equity may also be referred to as the residual of assets minus liabilities. These references make sense if you think of the basic accounting equation:

Assets = Liabilities + Owner's Equity

and just rearrange the terms:

Owner's Equity = Assets - Liabilities

Equity is ownership in any asset after all debts associated with that asset are paid off. For example, a car or house with no outstanding debt is considered the owner's equity because he or she can readily sell the item for cash.

The key principle of a balance sheet

All assets

+ Owner’s Equity