Tuesday 5 May 2015

Lesson #12 - The First Statement - THE BALANCE SHEET

The Balance Sheet (also known as The Statement of Financial Position) shows us the position or net worth of the company or business at a particular point in time (e.g. a year, a quarter or a month). A snapshot!

I'm sure I look better without that cowboy hat on!

The Balance Sheet is made up of ASSETS, LIABILITIES and EQUITY, where the elements are presented true to THE ACCOUNTING EQUATION.

If you recall, the ACCOUNTING EQUATION is as follows: -

EQUITY = ASSETS - LIABILITIES

When you spin it around, the following equation is also true...

ASSETS = LIABILITIES + EQUITY


Here's an example of a Balance Sheet.


Remember - The Balance Sheet is always in balance, and never out of balance. In other words, there should be no differences arising.


Let's allow The Wallflowers to solidify this with a song called "The Difference".


Enjoy!!!





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