simple balance sheet
TRANSCRIPT
Classified Balance Sheet
Section 2 Objective 9
o Arrange assets and liabilities in order of • Permanence• Liquidity
o Prepare balance sheet
Classified Balance Sheet• The Balance Sheet shows
a listing of a firm’s assets, liabilities and capital at a particular date
• Assets and Liabilities in a balance sheet are classified and shown in categories
• The assets and liabilities can be arranged in order of permanence or liquidity
Classified Balance Sheet
• Assets– Assets are classified into two
categories. • Current assets are assets
owned by the business for a short period time. They are quickly turned into cash within one year. Examples of current assets include cash in hand, cash at bank, inventory and accounts receivable (debtors)
• Non-currents assets are those which a business intends to keep and used to generate income for a long period of time (for more than one year). Examples of non-current assets include premises, machinery, equipment and vehicles
Classified Balance Sheet
Classified Balance Sheet
• Liabilities– Liabilities are classified
into two categories. • Current liabilities are sums
of money owed to individuals or firms which will be settled in less than one year. Examples of current liabilities are accounts payable (creditors) and bank overdraft
• Non-current liabilities are sums of money owed to individuals or firms which will be settled in more than one year. Examples of non-current liabilities are mortgage loans and bank loans
Classified Balance Sheet
Classified Balance Sheet
The date at which it is being preparede.g. as at February 28, 2017
When preparing the balance sheet, show the following information in the heading:
The name of the organisatione.g. DB Enterprises
The name of the financial statemente.g. Balance Sheet
(ask you self these questions?)
Classified Balance Sheet
• Presentation of the Balance Sheet – Style– Assets and Liabilities in a Balance Sheet can
be arranged in two styles. – The styles are order of permanence and order
of liquidity:• Order of permanence presentation in the balance
sheet, assets are placed first.• It reflects the length of time each asset is expected
to benefit.
Classified Balance Sheet
• Non-current assets are placed first, starting with the asset that will last longer than one year
• Current assets are shown in the following order of permanency– Inventory– Receivables (Debtors)– Bank – Cash• In the other half of the balance sheet, the capital and liabilities
categories are shown in the following order permanency:• Capital• Non-current liabilities• Current liabilities
Classified Balance Sheet
Classified Balance Sheetorder of permanence
EXAMPLE OF SIMPLE BALANCE SHEETSB. Enterprises $ $ $Balance Sheet as at 31 J uly 2018
Non-current AssetsLand & Building *Fixtures and Fittings *Equipment * **
Current AssetsInventory *Accounts receivable *Cash at bank *Cash in hand * ** ***
Capital **
Non-Current LiabilityMortgage *Bank Loan * **
Current LiabilityAccounts payables *Bank overdraft * ** ***
• Balance sheet style of presentation for order of liquidity:– shows the assets (that is current assets) which are already in cash
form first – and the assets which are more difficult to convert to cash in the near
future last.• The order of presentation starts with cash in hand and ends
with inventories or prepaid expenses.• For the other half of the balance sheet, current liabilities will
be shown before non-current liabilities and capital will be placed last.
Classified Balance Sheet
Classified Balance Sheetorder of liquidity
EXAMPLE OF SIMPLE BALANCE SHEETSB. Enterprises $ $ $Balance Sheet as at 31 J uly 2018Current AssetsCash in hand *Cash at bank *Accounts receivables *Inventory * **
Non-current AssetsEquipment *Fixtures and Fittings *Land and Building * ** ***
Current LiabilityAccounts payables *Bank overdraft * **
Non-Current LiabilityBank Loan *Mortgage * **
Capital ** ***
When preparing a Balance Sheet• Show the following information on the
balance sheet– The name of the firm– The name of the financial statement– The date at which it is being
prepared• Use either the style of order or
presentation or order for liquidity (not both together)
• Total each part of the balance sheet
Classified Balance Sheet
• Look at the link on the next slide and watch the video on creating a simple balance sheet
• Create a Simple Balance Sheet
Ptionline divisionhttps://www.youtube.com/watch?v=QYA0GiSQ524
Simple Balance Sheet