Balance Sheet Flashcards
What is a Balance Sheet ?
A financial statement that shows the Assets, Liabilities & Capital of a business at a particular date
What are the three components of a Balance Sheet ?
Assets
Liabilities
Capital
What are Assets, & What are the TWO types of Assets ?
Economic resources OWNED by a business
The two types are Current & Non-current
What are Current Assets ?
Assets that are expected to be converted into cash or used up within one accounting year
What are the FOUR examples of Current Assets ?
Cash
Bank
Inventory
Accounts Receivable
What are Non-current Assets ?
Assets that are not expected to be converted into cash, to be used up or sold within one accounting year
What is another name for Non-current Assets ?
Fixed Assets
What are 5 examples of Non-current Assets ?
Furniture
Buildings
Land
Equipment
Motor Vehicles
What are Liabilities ?
Debts of the business (the amount the business OWES)
What is the person that the money is owed to called ?
The Creditor
What is Current Liabilites ?
Amounts that are expected to be paid off or settled within one accounting year
What are 3 examples of Current Liabilities ?
Accounts Payable
Bank Overdraft
Expenses Owing (e.g. salaries owing)
What are Non-current Liabilities ?
Amounts that are not expected to be paid off or settled within one accounting year
What are 2 examples of Non-Current Liabilites ?
Bank Loan
Mortgage
What is Capital ?
The resources invested into a business by its Owner(s)
When can an owner invest in their business ?
They can invest in the beginning of the business or during the life of the business
What is the Accounting Equation ?
This is the relationship between Assets, Liabilities & Capital of the business
Assets = Liabilities + Capital
What is Working Capital & what is the Equation ?
The amount of funds that a business has available to finance its day-to-day operations
WC = CA - CL
(working capital) = (current assets) - (current liabilities)
The difference between a Positive & Negative Working Capital
Positive working capital ~ the business has enough funds to pay for its short term obligations
(business is considered liquid)
Negative working capital ~ enough funds is not available when the obligations become due
(business is considered insolvent / not liquid)
