Final Account

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 Final Accounts

Balance Sheet Terms

Assets: all those items of value which are owned by the business. Assets are further categorized as fixed
assets and current assets.
Fixed Assets: All those assets which are owned by the business for a period of more than one year. Example
Vehicle, machinery, land, building.
Current Assets: all those assets which are owned by the business for a short period of time. Example Cash, stock, debtors.
Liabilities: All items owed by the business. Liabilities can be classified in two types:
Long term liabilities: These are long term borrowings which are owed by the business for more than one year. Example
include long term bank loans.
Current liabilities: These are defined as obligations or debts of the business which have to be settled within one year.
Example includes Creditors and bank overdrafts, stock.
Working Capital: Also known as net current assets= Current assets - Current liabilities
Working capital is needed for the day to day functioning of the business. A shortage of working capital can lead to cash
flow problems.
Net assets: Fixed assets + Working Capital
Shareholders’ fund is the total sum of money invested into the business by the shareholders.
Capital employed: It is the total long term liabilities and shareholders’ funds which have been used to pay for the net assets
of the business.
Capital employed = Net assets

Accounting Equation

Assets= Liabilities + Shareholder’s funds