The Balance Sheet - Net Assets

Question 1

What is A Balance Sheet?

Answer 1

Tells you what the business has done with the money its got.

It Records where the business got its money from & what it has done with it

Question 2

When is it calculated?

Answer 2

A particular date, usually the last day of the companies financial year

Question 3

What are the parts to a balance sheet?

Answer 3

• Fixed Assets
• Current Assets
• Current Liabilities
• Net Current Assets

Question 4

What are Fixed Assets?

Answer 4

They last more than a year:

• Premises
• Machinery
• Vehicles etc

Question 5

What are Current Assets?

Answer 5

Listed in increased order of liquidity:

• Stock (Inc raw materials & finished products not yet sold)
• Debtors - Value of products sold.
• Cash (sitting in the bank unspent)

Question 6

What are Debtors?

Answer 6

Customers that have bought on credit, so products sold but not been paid for yet.
Basically the firm is lending money to customers so they can buy the products

Question 7

Explain “Current Liabilities”

Answer 7

The Bills the firm has to pay soon:
- Any payments that must be paid within a year of date on balance sheet
- Unpaid corporation TAX, payable out of the previous year’s profits
- Unpaid dividends to shareholders
This is money that doesn’t really belong to the firm so you take it away from the current assets figure

Question 8

Explain “Net Current Assets”

Answer 8

Current Assets - Current liabilities = Net Current Assets

Also called working capital

Question 9

What are Net Assets?

Answer 9

Also called Net Worth - this is the amount the firm would make if it sold all its assets - in theory it’s what the firm is worth

Question 10

How do you work out Net Assets?

Answer 10

Add Net Current Assets to the Fixed Assets