Lesson 3 - Balance Sheets (2) Flashcards
What is the purpose of the Balance Sheet in Accounting?
A Balance Sheet is a financial statement that provides a snapshot of a company’s financial position at a specific point in time, showing its assets, liabilities, and owner’s equity.
What’s the difference between “current” and “non-current” assets on a Balance Sheet?
Current assets are short-term assets that are expected to be converted into cash or used up within one year, while non-current assets are long-term assets that have a useful life of more than one year, such as property and equipment.
What is the residual interest that an owner has invested in a business recorded as in the owners equity section?
Capital.
How do you calculate the total of the owners equity section?
Assets - liabilities = OE
How would you classify the following item?
Inventory is a current asset.
How would you classify the following item?
Van is a non-current asset.
How would you classify the following item?
Electricity bill is a current liability.
How would you classify the following item?
Accounts Receivable is a current asset.
How would you classify the following item?
Accounts Payable is a current liability.
How would you classify drawings?
Owners equity.
How would you classify capital contribution?
Owners equity.
Which two figures must balance in the Balance Sheet?
Total Assets = Total Equities
How do you calculate Total Equities?
Total Liabilities (CL+NCL) + Total OE
Why does a balance sheet have two columns for balances?
Left column = item totals
Right column = element totals
