Unit 16 - Balance Sheet

Also known as a statement of financial position. Interested stock investors as well as creditors utilize balance sheets as a measure of determining the financial standing of a company due to its listing of liabilities and what is owed. Moreover, a balance sheet contains the summary information regarding the assets of a company.

A Balance Sheet or Statement of Financial Affairs is divided into two basic sections Assets and Liabilities.

Assets are further divided into fixed and current assets. Liabilities are divided into short and long term liabilities and also includes owner’s equity format is as follows

Joshua’s Guitar Shop Limited

Statement of Financial Affairs

For the year ended September 30th 20x5

$ $

Assets

Current Assets

Cash 32,800

Accounts Receivable 300

Inventory 40,800 73,900

Long term Assets

Land and Building 100,000

Accumulated Depreciation (2,000) 98,000

171,900

Current Liabilities

Accounts payable 50,000

Accrued Expenses 450

50,450

Long term Liabilities 99,500

149,950

EQUITY

Retained Earnings 11,950

Stock 10,000

21,950

TOTAL LIABILITIES AND OWNERS EQUITY 171,900

Assignment

Please prepare the following balance sheet for Ethan’s Investment Limited

For the year ended August 31st 2016.

Cash $100,000

Short term investments $50,000

Shareholders stock $300,000

Land $300,000

Building $150,000

Depreciation on building $50,000

Accounts receivable $100,000

Accounts payable $140,000

Stock $200,000

Vehicles $70,000

Depreciation on vehicles $10,000

Accrued expenses $10,000

Long term liabilities $300,000

Retained earnings $160,000