Accounting Unit 3/4 Balance Sheet

BALANCE SHEET

By Himasha Panagoda 11E, Saumyaa Balakanthan 11E & Charindya Janakantha 11J

→ General info:

• The Balance Sheet is one of the major accounting reports.
• It is prepared for stakeholders. Stakeholders are individuals or businesses that are interested in the performance of the business (e.g. the owner, manager, potential owners, people/businesses who are owed money by the business, employees, Australian Taxation Office (ATO) etc.)
• A new Balance sheet is prepared at the end of each reporting period. The reporting period is the period over which profit is calculated. The last day of the period is called Balance Day and the balance sheet is prepared on this day.
• It shows the assets and equities at that point of time. Assets are resources under the control of the business, as a result of past events, that will provide future economic benefits. Equities refers to who has an interest or ownership in the assets (Under the equities heading, liabilities and owner’s equity are included in the column of the BS).
• The most important rule:  ASSETS = EQUITIES

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Example of an unclassified balance sheet:

*The owner of Clean Cut Mowers is Bob.

Clean Cut Mowers Balance Sheet at 30/6/15

Assets                                                      $	Equities                                                    $
Bank                                                    50000	Liabilities
Stock control                                       15000	Loan                                                  10000
Office assets                                       25000	GST owing                                            5000
Premises                                             90000	Total liabilities                                    15000
Vehicle                                                 31000
	Owner’s equity
	Capital, Bob                                       100000
	Add net profit                                       13000
	Less drawings                                      7000
Total assets                                      211000	Total equities                                   211000

→ Title:

• State the name of the business
• State what type of report it is. In this case “Balance Sheet”
• State the specific date of the end of the reporting period (e.g. … at 31/12/15)

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→ Asset column:

• Title the column. In this case “ASSETS” towards the left hand side and a dollar sign towards the right hand side)
• On the left hand side, list the type of asset (e.g. bank, stock control, vehicle, etc.)
• On the right hand side, list of monetary value of each asset (e.g 50000). ***Avoid using a comma in the number and do not place a dollar sign in front.  Avoid doing this → $50,000
• Bank- get the value of the bank/cash from the final value (cash at end) in the Cash Flow Statement.
• Stock control- a simple way to find the value of stock control is by using the last value in the balance column of the stock card. However, if the stock card is not given there is a way to calculate stock control:

Stock Control on Balance Day = Stock control from previous balance sheet  +  stock that has been purchased (the total/ final value in the Stock column of the Cash Payments Journal)  ー  stock that has been sold (the total/final value in the Cost of Sales column in the Cash Receipts Journal) + stock that has been put into the business due to capital contribution ー stock that has been taken by the owner (A.K.A drawings of stock) . Remember not to deduct drawings of cash because this the Stock control.

• Office Assets - office assets from previous balance sheet + office assets that have been purchased + office assets that have been put into the business due to capital contribution  ー office assets that have been taken by the owner
• Premises- *for the time being, this value usually stays constant
• Vehicle - *for the time being, this value doesn’t normally change over reporting periods.  

*Later on in the unit, you will be introduced the concept of depreciation which will have an affect on assets such as premises, vehicle and office assets.

• GST owing: When the ATO owes the business money. It mean the GST paid exceeds the GST received. This does not happen too often.

• Total assets- Add together all of the values from the assets column.

Clean Cut Mowers Balance Sheet at 30/6/15

Assets                                                      $	Equities                                                    $
Bank                                                    50000	Liabilities
Stock control                                       15000	Loan                                                    10000
Office assets                                       25000	GST owing                                            5000
Premises                                             90000	Total liabilities                                    15000
Vehicle                                                 31000
	Owner’s equity
	Capital, Bob                                       100000
	Add net profit                                       13000
	Less drawings                                      7000
Total assets                                      211000	Total equities                                   211000

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→ Equities column:

• Title the column. In this case “EQUITIES” towards the left hand side and a dollar sign towards the right hand side)
• On the left hand side, list the type of equity (e.g. bank overdraft, loan, GST owing, etc.)
• On the right hand side, list of monetary value of each equity (e.g 10000). ***Avoid using a comma in the number and do not place a dollar sign in front.  Avoid doing this → $10,000
• In the equities column there are two subsections: Liabilities and Owner’s Equity. Liabilities includes such things as loan or GST owing. Owner’s equity will only include the Capital (Capital, owner’s name). In the example above, “add net profit” and “less drawings” is only there to assist you with calculating the new Capital. Later on, these two titles will/might not be included in the balance sheet.

Clean Cut Mowers Balance Sheet at 30/6/15

Assets                                                      $	Equities                                         $
Bank                                                    50000	Liabilities
Stock control                                       15000	Loan                                     10000
Office assets                                       25000	GST owing                             5000
Premises                                             90000	Total liabilities                    15000
Vehicle                                                31000
	Owner’s equity
	Capital, Bob                   100000
	Add net profit                         13000
	Less drawings                       7000
Total assets                                       211000	Total equities                    211000

• LIABILITIES:
• Bank overdraft- get the value of the bank/cash from the final value (cash at end) in the Cash Flow Statement.
• Loan: money the business has borrowed and is a future obligation. If the loan is one that has been present since the last reporting period, the previous loan value will be on the previous balance sheet. Add any new loans received and subtract any loan repayments that occurred during the reporting period.
• GST owing: When the business owes the ATO GST. The GST received exceeds the GST paid. To easily calculate the GST, use a GST schedule:

*GST at start of period is from the previous balance sheet:

GST schedule at 30/6/15
	$
GST at start of period	3000
+ GST collections	17000
+ATO refunds for GST	-
Subtotal	20000
ーGST payments	8000
ーATO payments	7000
GST at end of period	5000

Total Liabilities- Add together all of the values from the liabilities sections.

• EQUITIES:
• Owner’s equity or also called Capital- this is owner’s claim on the assets. Each reporting period the capital will change if there are any transactions such as expenses or revenue. To work out the new capital:

Capital from previous balance sheet   +net profit OR ーnet loss    + any capital contributions   ー any drawings

*Net profit/Net loss can be found by looking at the last value in the Income Statement.

Total Equities- Add together the value from total liabilities and the new capital value.

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• REMEMBER:

The total assets and total equities should always BALANCE each other out.

TOTAL ASSETS = EQUITIES

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