Balance sheet
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Transcript of Balance sheet
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