BALANCE SHEET

April Vivienne M. Ancheta

Balance Sheet
shows the financial condition of the business
in a point
in time
can be completed at any time
Liabili
ty

Elements

Ass
et

Equit
y

Purpose
how much assets the company has to
protect shareholders
how efficiently management is using
capital
how fast a business can grow
the risk of bankruptcy

Assets
are resources owned by a company and which
future economic benefits are expected to flow in the
company and can be measured reliably
Classification:
Current Assets realizable within one year from
the balance sheet date
Non Current Assets realizable beyond one year
from the balance sheet date

Liabilities
are present obligations of the enterprise arising from past
events, the settlement of which is expected to result in an
outflow from the enterprises resources embodying economic
benefits.
Classification:
Current Liabilities expected to be liquidated within one
year from the
balance sheet date
Non Current Liabilities expected to be liquidated more
than one year
from the balance sheet date

Equity
the amount invested by the owners in the company.
This also includes the result of operations.

Format of Balance Sheet

Assets

Current Assets
xxx
Non Current Assets xxx
Total

xxx

Liabilities
& Equity
Current
Liabilities
xxx
Non Current Liabilities xxx
Total Liabilities
Equity

xxx

xxx

Total Liabilities & Equity

xxx

Format of Balance Sheet

Assets
Current Assets
xxx
Non Current Assets
xxx
Total Assets

xxx

Liabilities & Equity

Current Liability
xxx
Non Current Liability
xxx
Equity

xxx

Total Liabilities & Equityxxx

Test of Financial Strength and

Liquidity
Liquidity Ratio measures the ability of the
firm to pay
its obligations as they become due
Formulas:
Current Ratio = Current Assets/Current
Liabilities
Quick Ratio = (Current AssetsInventory)/Current
Liabilities
Operating CF Ratio = CF from

Continuation:
Working Capital = Current Assets Current Liabilities
Working Capital to Dollar Sales = Working Capital/
Total Sales
Debt to Equity Ratio = Total Liability/Stockholders
Equity

Example of Current Assets

Cash
Trade Receivable
Notes Receivable
Merchandise Inventory
Prepaid Expenses
Marketable Securities
Short-term Investments

Non-Current Assets
Computer
Furniture & Fixtures
Building
Equipment
Held to Maturity Securities
Investment in Subsidiaries/Affiliates

Current Liabilities
Accounts Payable
Accrued Expenses
Salaries Payable
Interest Payable
Deposit Liabilities
Loan Payables

Non Current Liabilities

Bonds Payable
Notes Payable
Mortgage Payable
Loans Payable

Stockholders Equity
Paid in Capital
Additional Paid in Capital
Retained Earnings
Undivided Profits
Treasury Stocks

Sample Problem:
Accounts payable
350,000
Accounts Receivable
450,000
Property, plant and equipment
5,600,000
Accumulated depreciation
1,200,000
Mortgage payable, due in 5 years 1,500,000
Share capital, P100 par
4,000,000
Share premium
500,000
Cash and cash equivalent
800,000
Accrued expenses
100,000
Inventories
900,000
Long term investments
950,000

Note payable, long-term

500,000
Note payable, short-term
200,000
Office supplies
50,000
Patent
800,000
Prepaid rent
150,000
Retained earnings
1,350,000
Required: Prepare the balance sheet of ABC
Corporation as of December 31, 2014.

Thank You!