6. The Balance Sheet

The last financial statement you need is the Balance Sheet.

The balance sheet is normally stated as a situation on a particular date. It is a summary of all the financial information, broken down into three areas:

1. ASSETS
2. LIABILITIES
3. EQUITY

So the Balance Sheet is divided into 3 sections.

The TOP portion lists your organisation's assets. Assets are classified as current assets and long-term or fixed assets. Current assets are assets that will be converted into cash or will be used by the business in a year or less. It includes: Cash, accounts receivable, Inventory = TOTAL CURRENT ASSETS.

Other assets that appear in the balance sheet are called long-term or fixed assets. These include: Capital and plant, Investments, Other assets = TOTAL LONG-TERM ASSETS

After the assets are listed you need to list the liabilities of your business. Again they are listed as current on the one hand and long-term on the other.

Current liabilities are: Accounts payable, Accrued liabilities (for example salaries not paid by the close of books) taxes = TOTAL CURRENT LIABILITIES.

Then long term liabilities: bonds, mortgage, other long term liabilities = TOTAL LIABILITIES

Once this is done the owner's equity is calculated as the difference of the two.


Talk to me if you need any further help. proplib@tiscali.co.za

Charl Heydenrych.
Johannesburg
22 June 2008