5.4 Balance sheets

Question 1

define current assets

Answer 1

short-term item business does not expect to turn into cash within a year
e,g inventories

Question 2

define balance sheet

Answer 2

accounting statement records at a particular date:

1. owner’s equity
2. assets
3. liabilities

Question 3

define current liabilities

Answer 3

debts business expects to pay within one year

Question 4

define non-current assets

Answer 4

long-term item business expects to turn to cash before the date of the next balance sheet
e.g building

Question 5

Non current liabilities

Answer 5

debts business expects to pay beyond one year

Question 6

define owener equity

Answer 6

money that a business owes to its investors

e.g capital and retained profit

Question 7

list all liabilities

Answer 7

• current liabilities(within one year)
• non current liabilities (more than one year)
• owner equity(own to owner)

Question 8

A balance sheet shows:

Answer 8

1 The assets the business owns
2 What the business is owed
3 What the business owes
4 How the business finances its activities

Question 9

Why is the balance sheet important

Answer 9

• financial health at a moment in time

- provide warning signs