1st Bac - Basic Balance Sheet

 Basic Balance Sheet

The last step in the accounting process is the elaboration of a report that gives information about the financial situation of a business. In accounting this report is known as balance sheet.

 

Characteristics of the Balance Sheet

A balance sheet is a report that explains, for a period of time, the financial situation of a business taking into account the investment (assets), the debt (liabilities) and the resources given by the entrepreneur (equity).

Assets = Liabilities + Equity

 

Importance of the Balance Sheet

The information found on the balance sheet helps the company at the moment of identifying its strengths and weaknesses. Also, it helps to look at the progress the company has had.

 

Process of Elaborating a Balance Sheet

We will look at some information from a bakery in order to elaborate a balance sheet.

Investment (Assets):

-       Money in the bank                             $3000

-       Capital in materials                             $1500

-       Money owed by customers                $750

-       Money invested in fixed assets          $15000

Financed (Liabilities and Equity)

-       Money owed to suppliers                   $750

-       Money owed to banks (over a year)  $2500

-       Own money invested in the business $17000

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