financial accounting (528)

8/9/2019 Financial Accounting (528)

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YASIR MEHMOOD

AD-513997


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BALANCE SHEET:

CRYSTAL AUTO WASHBalance Sheet

September 30, 2007

ASSETS LIABILITIES & OWNERS EQUITY

CURRENT ASSETS LIABILITIES

Cash 9,200 Notes Payable 29000

Accounts Receivable 800 Accounts Payable 14000

Supplies 400 Salaries Payable 3000

FIXED ASSETS Total Liabilities0. 46000

Land 68000 OWNERS EQUITY

Buildings 52000 Capital Stock 100000

Equipment 65000 Retained Earning 49400

Total Assets 195,400 Total 195,400


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WHY CALLED BALANCE SHEET:

Afundamental characteristic of every statement offinancial position is that the total for assets always

equals the total of liabilities plus owners equity.This agreement or balance of total assets with thetotal of liabilities and owners equity is the reasonfor calling this financial statement a balance sheet.

(Accounting Equation)

Assets = Liabilities + Owners Equity


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HEADING:

The Heading communicates three things:

1. N ame of the business.

2. N ame of financial statement.

3. T he date.


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ASSETS:

Economic resources owned by an entity.

Resources that are owned by a business and are expected tobenefit in future operations. In most cases, the benefit tofuture operations comes in the form of positive future cashflows. The positive future cash flows may come directly as theasset is converted into cash (collection of a receivable) orindirectly as the asset is used in operating the business to

create other assets that result in positive future cash flows.


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CURRENT ASSETS:

The assets that are to be used within a year or thatare expected to be used in a year are called current

assets.

Cash, Notes receivable in near future, accountsreceivable and supplies are the example of current

assets.


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FIXED ASSETS:

The assets that are to be used more than a year orthat are expected to be used within five or more

years are called fixed assets.

Land, building and office equipment etc are theexample of current assets.


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LIABILITIES:

Debts or obligations of an entity that resulted frompast transactions. They represent the claims of

creditors on the enterprises assets.

Notes payable, accounts payable and salariespayable are the example of current assets.


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CURRENT LIABILITIES:

Current liabilities are obligations that must be paid within one year or within the operating cycle,

whichever is longer. Another requirement forclassification as a current liability is the expectationthat the debt will be paid from current assets.

Accounts payable, Notes payable, salaries payableetc are the example of current assets.


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LONG-TERM LIABILITIES:

Long-term obligations arise from majorexpenditures, such as attainments of plant assets,

the purchase of another company, or refinancing anexisting obligations that is about to mature. Thustransactions involving long-term liabilities arerelatively few in number but often involve large

dollar amounts.


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ESTIMATED LIABILITIES:

The term estimated liabilities refers to liabilitiesthat appear in financial statements at estimated

dollar amounts. Estimated liabilities involve somedegree of uncertainty. However, the liabilities areknown to exist and the uncertainty as to dollaramount is not so great as to prevent the company

from making reasonable estimate and recording theliability.


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OWNERS EQUITY:

O wners equity represents the owners claims onthe assets of the business. Because liabilities or

creditors claims have legal priority over those ofthe owners, owners equity is a residual amount.


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financial accounting (528)

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