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Chapter 2 The Balance Sheet

2. Chapter 2 The Balance Sheet. The Accounting Equation A = . Take a piece of paper and write down how . Example: Cash - $80 Savings - 2,000 Laptop - 1,400 etc. On the same piece of paper write down how . Example: Owed to mom - $20

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Chapter 2 The Balance Sheet

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  1. 2 Chapter 2The Balance Sheet Chapter 2 – The Balance Sheet l Accounting 1, 7th Edition

  2. The Accounting EquationA = • Take a piece of paper and write down how . • Example: • Cash - $80 • Savings - 2,000 • Laptop - 1,400 • etc. • On the same piece of paper write down how . • Example: • Owed to mom - $20 • Internet bill - 45 • Phone bill - 60 • etc. Presentation Title runs here l 00/00/00

  3. The Accounting EquationA = L + OE • How to remember this equation?!?!? • Aloe Vera • Assets = Things you own • Liabilities = • Owner’s Equity = Your net worth Presentation Title runs here l 00/00/00

  4. Practice Time!Work with a partner if you like! • Page 20 in your textbook. Complete exercises 1 – 6  Presentation Title runs here l 00/00/00 This Photo by Unknown Author is licensed under CC BY-NC

  5. The Balance SheetWhat is it used for? • Definition: A balance sheet is a statement showing the financial position of a person, business or other organization. • Structure: • A = L + OE  Assets appear on the left side, Liabilities and owner’s equity appear on the right side • Three line heading: • Who?  Business Name • What?  The Balance Sheet • When?  Year End Date • Assets are listed in order of their . WHAT DOES THAT MEAN?? Presentation Title runs here l 00/00/00

  6. The Balance SheetWhat is it used for? • Definition: A balance sheet is a statement showing the financial position of a person, business or other organization. • Structure (continued): • Liabilities are generally listed in the order in which they are paid • Financial details of all items are fully disclosed • The two final totals (Total Assets and Total Liabilities and Equity) are underlined with a double line. Presentation Title runs here l 00/00/00

  7. The Balance Sheet1. Write the heading: Who Chapter 2 – The Balance Sheet l Accounting 1, 7th Edition

  8. The Balance Sheet1. Write the heading: Who, What Chapter 2 – The Balance Sheet l Accounting 1, 7th Edition

  9. The Balance Sheet1. Write the heading: Who, What, When. Chapter 2 – The Balance Sheet l Accounting 1, 7th Edition

  10. The Balance Sheet2. Under the Assets subheading, list all assets in order of liquidity. Chapter 2 – The Balance Sheet l Accounting 1, 7th Edition

  11. The Balance Sheet3. Under the Liabilities subheading, list all liabilities in the order they are due. Chapter 2 – The Balance Sheet l Accounting 1, 7th Edition

  12. The Balance Sheet4. Subheadings with more than one item must be totalled. Total the liabilities with a ruled line above the total. Chapter 2 – The Balance Sheet l Accounting 1, 7th Edition

  13. The Balance Sheet5. Under the Owner’s Equity subheading, record the Capital amount. Chapter 2 – The Balance Sheet l Accounting 1, 7th Edition

  14. The Balance Sheet6. Calculate total assets and total liabilities and owner’s equity. They should match. Include a ruled line above the totals. Chapter 2 – The Balance Sheet l Accounting 1, 7th Edition

  15. The Balance Sheet7. Put two ruled lines below the two totals. Chapter 2 – The Balance Sheet l Accounting 1, 7th Edition

  16. The Balance Sheet8. Add dollar signs to the first number in each column, the total assets, and the total liabilities and equity. Chapter 2 – The Balance Sheet l Accounting 1, 7th Edition

  17. Accounts Receivable vs. Accounts Payable • A/R  Debts of customers owed to the business • A/P  Debts of the business owed to suppliers Presentation Title runs here l 00/00/00

  18. The Balance SheetThirsty?? • Let’s look at the Coca-Cola Company’s Balance Sheet: • http://www.marketwatch.com/investing/stock/ko/financials/balance-sheet Presentation Title runs here l 00/00/00

  19. The Balance SheetPacioli Designs • Create your first balance sheet. • Take a look at the worksheet and create Pacioli Design’s balance sheet! • Reference pages 26 & 27 for formatting guidelines! Presentation Title runs here l 00/00/00

  20. Creditors’ vs. Owner’s Claims • If a business is closed down, who takes possession of the assets? Creditors? Owner(s)? Both? • Claims of creditors will be settled before any claims of the owner(s). • One more exercise! Go to page 33 in your text book and complete • exercise 2 (Carla’s Interior Design). Presentation Title runs here l 00/00/00

  21. Accounting Standards • IFRS = International Financial Reporting Standards • http://www.ifrs.org/use-around-the-world/why-global-accounting-standards/ (video) • Recommended reading: • https://www.pwc.com/ca/en/private-company/publications/aspe-or-ifrs-2011-03-en.pdf Presentation Title runs here l 00/00/00

  22. Accounting Standards • Canadian GAAP = Canadian Generally Accepted Accounting Principles • ASPE: • Private enterprises can choose between using IFRS or ASPE guidelines. ASPE guidelines are closer to traditional Canadian Standards. Presentation Title runs here l 00/00/00

  23. Accounting StandardsExercise • Let’s take a closer look at the layout differences between ASPE and • IFRS. Complete exercise 1 (A, B, C, D) on page 38 in your • textbook. • Feel free to work with a partner! Presentation Title runs here l 00/00/00

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