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TOPIC: BALANCE SHEET
Sub-topic 1 (i) Meaning of Balance Sheet
Balance Sheet is the financial position of an organization at any given point of time, e.g it shows what a business owns, (asset) those it owes, (liabilities) and the net worth (capital).
(ii) Items on a Balance Sheet
Items on a Balance Sheet are (1) Assets e.g Plants and Machinery, Motor Vehicle, Land and Building, Freehold Premises, Furniture and Fitting, Stock, Cash, Debtor, Bank, Goodwill and prepayment. (2) Liabilities e.g Debenture, Long term loan, Short term loan, Overdraft, Creditors and accrued expenses. (3) Capital = Net Profit – drawing.
(iii). Uses of Balance Sheet
(i). It provides information to prospective investors.
(ii) It gives the financial summary of a business.
(iii).It reveals the working capital of a business.
(iv).It indicates the liquidity position of an organization.
(v).It portrays the source of capital of a business.
(vi) It presents statement of fixed and current assets, and shows current and long term liability.
(iv). Classification of items in the Balance sheet.
(v). Distinction between Capital and Liabilities
Capital is cash or fund set aside for further wealth, or amount of money invested to the business while liabilities are those the business is indebted to.
(vi) Differences between Horizontal and Vertical balance Sheet.
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