accounting basis l 3
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TRANSCRIPT
ACCOUNTING BASIS
Lecture 3Balance sheet
LEARNING OBJECTIVES
Understanding of Balance Sheet Balance sheet items classification Types and forms of balance sheet
Assets
Liabilities &
Equity
ACCOUNTING EQUATION
LiabilitiesLiabilities EquityEquityAssetsAssets = +
THE ACCOUNTING EQUATION PRESENTS THE RESOURCES OF THE BUSINESS AND THE CLAIMS TO THOSE RESOURCES
4
EconomicResources
Claims toEconomicResources
Assets
Liabilities &
Equity
BALANCE SHEET ITEMS
The purpose of the balance sheet is to report a company’s financial position on a particular date.
• Assets are the economic resources of a business that are expected to be of benefit in the future
• Claims to assets come from– Liabilities
• Economic obligations - debts payable to outsiders, called creditors
– Owners’ equity (capital)• Assets held by the owners of the business
Balance sheet items
Current
assets
Current
assets
ASSETS
Non current assets
Non current assets
Current assets include cash and other assets that are reasonably expected to be converted to cash or consumed within the
coming year, or within the normal operating cycle of the business if that’s longer than 1
year.
Current assets include cash and other assets that are reasonably expected to be converted to cash or consumed within the
coming year, or within the normal operating cycle of the business if that’s longer than 1
year.
The operating cycle
Cash Raw materials
Finished goods
Accounts receivable
Prepaid expensePrepaid expense
CashCash
Investments
Investments
InventoryInventory
Receivabl
e
Receivabl
eCurrent
assets
Current
assets
Long term investmentLong term investment
IntangibleIntangible
Tangible
Tangible
Noncurrent assetsNoncurrent assets
EquipmentEquipment
BuildingBuilding
Land Land
Tangible assets
Tangible assets
FurnitureFurniture
TransportationTransportation
Tangible assets
Tangible assets
Property, Plant and Equipment
Property, Plant and Equipment
FranchisesFranchises
CopyrightsCopyrights
Patent Patent
Intangible assets
Intangible assets
Computersoftware
Computersoftware
GoodwillGoodwill
Short term
liabilities
Short term
liabilities
LIABILITIES
Long term
liabilities
Long term
liabilities
Unearned
revenue
Unearned
revenue
Wages PayableWages Payable
Notes PayableNotes
PayableAccounts Payable
Accounts Payable
Creditors’ claims on
assets
Creditors’ claims on
assets
SHORT TERM LIABILITIES
Tax Payable
Tax Payable
Bank loan
Bank loan
Notes PayableNotes
PayableBond’s PayableBond’s Payable
Creditors’ claims on
assets
Creditors’ claims on
assets
LONG TERM LIABILITIES
Bank loan
Bank loan
Owner’sclaim on
assets
Owner’sclaim on
assets
Owner’s Equity
Owner’s Equity
Retained EarningsRetained Earnings
OWNER’S EQUITY
Types of balance sheetTypes of balance sheet
Beginning balance sheet
Ending balance sheetOperating balance
sheet
Beginning balance sheet
Ending balance sheetOperating balance
sheet
Assets Amount Liabilities & Owner’s equity
Amount
Current assets
Short term liabilities
-
Cash 10000,0 Long term liabilities
-
Total current assets
10000,0 Total liabilities -
Noncurrent assets
- Owner’s Equity 10000,0
Total assets 10000,0 Total liabilities & owner’s equity
10000,0
“Altai” Co.ltd
Beginning balance
2011.03.01
“Altai” Co.ltd
Beginning balance
2011.03.01
Forms of balance sheetForms of balance sheet
Balance sheet in form of account
Balance sheet in form of statement
Balance sheet in form of account
Balance sheet in form of statement
Balance sheet in form of accountBalance sheet in form of account
Assets Liabilities and Owner’s Equity
Current assets Short term Liabilities
Cash 100.0 Tax payable 86.0
Receivable 60.0 Salary payable 340.0
Short term investment - Accounts payable 200.0
Inventory 350.0 Total short term liabilities 626.0
Prepaid expense 120.0 Long term liabilities -
Total current assets 630.0 Total liabilities 626.0
Noncurrent assets Owner’s Equity
Building 5000.0 Owner’s Equity 5500.0
Furniture 1200.0 Retained Earnings 704.0
Total noncurrent assets 6200.0 Total owner’s equity 6204.0
Total assets 6830.0 Total liabilities and owner’s equity
6830.0
Balance sheet in form of statementBalance sheet in form of statement
Balance Items Beginning balance
Ending balance
Assets
Current assets
Cash 100.0
Receivable 60.0
Short term investment -
Inventory 350.0
Prepaid expense 120.0
Total current assets 630.0
Noncurrent assets
Building 5000.0
Furniture 1200.0
Total noncurrent assets 6200.0
Total assets 6830.0
Balance sheet in form of statementBalance sheet in form of statement
Liabilities and Owner’s Equity Beginning balance
Ending balance
Short term Liabilities
Tax payable 86.0
Salary payable 340.0
Accounts payable 200.0
Total short term liabilities 626.0
Long term liabilities -
Total liabilities 626.0
Owner’s Equity
Owner’s Equity 5500.0
Retained Earnings 704.0
Total owner’s equity 6204.0
Total liabilities and owner’s equity 6830.0
