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What is a Balance Sheet Balance sheets provide a snap shot of the assets and liabilities of a business at a point of time It shows what the business owns, is owed and owes: Owns – Assets such as buildings, stock and cash Is Owed – Money from debtors Owes – Money to creditors and the bank Owes – To the investors and owners of the business (they own the profit)
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Balance Sheets IB BUSINESS Unit 3.5 What is a Balance Sheet
Balance sheets provide a snap shot of the assets and liabilities of
a business at a point of time It shows what the business owns, is
owed and owes: Owns Assets such as buildings, stock and cash Is
Owed Money from debtors Owes Money to creditors and the bank Owes
To the investors and owners of the business (they own the profit)
NET WORKING CAPITAL -2 8 CAPITAL EMPLOYED FIXED ASSETS Premises
2
FIXED ASSETS Premises 2 Equipment 4 Vehicles 10 CURRENT ASSETS
Stock 1 Debtors Cash at Bank CURRENT LIABILITIES Creditors 6 NET
WORKING CAPITAL -2 NET ASSETS EMPLOYED 8 Financed By SHAREHOLDERS
FUNDS Share Capital Reserves LONG TERM LIABILITIES Bank Loan
CAPITAL EMPLOYED Furniture & Furnishings 10 165 CURRENT ASSETS
Stock Debtors 4 Cash 2
FIXED ASSETS Land & Buildings 120 Equipment & Vehicles 35
Furniture & Furnishings 10 165 CURRENT ASSETS Stock Debtors 4
Cash 2 41 CURRENT LIABILITIES Creditors 15 Bank Overdraft 5 20 NET
WORKING CAPITAL 21 NET ASSETS EMPLOYED 186 Finance By: Share
Capital 98 Retained Profit Bank Loan 68 CAPITAL EMPLOYED LONG-TERM
LIABILITIES Long-term Loans 40,000 Medium-term Loans
2001 FIXED ASSETS Shop Premises 50,000 Fixtures & Fittings
12,000 Equipment 22,000 Van 10,000 94,000 CURRENT ASSETS Stock
Debtors 5,000 Cash in Bank 1,000 18,000 CURRENT LIABILITIES
Overdraft 8,000 Creditors 4,000 NET WORKING CAPITAL 6,000 NET
ASSETS EMPLOYED 100,000 Finance By: Share Capital Reserves Retained
Profit 60,000 LONG-TERM LIABILITIES Long-term Loans 40,000
Medium-term Loans CAPITAL EMPLOYED LONG-TERM LIABILITIES Long-term
Loans 38,000 Medium-term Loans 12,000
2001 FIXED ASSETS Shop Premises 60,000 Fixtures & Fittings
15,000 Equipment 25,000 Van 10,000 110,000 CURRENT ASSETS Stock
14,000 Debtors 3,000 Cash in Bank 20,000 CURRENT LIABILITIES
Overdraft Creditors NET WORKING CAPITAL NET ASSETS EMPLOYED 120,000
Finance By: Share Capital 50,000 Reserves Retained Profit 5,000
70,000 LONG-TERM LIABILITIES Long-term Loans 38,000 Medium-term
Loans 12,000 CAPITAL EMPLOYED E. BLYTON TIMBER TRADING
FIXED ASSETS Machinery 284.00 Van 450.00 734.00 CURRENT ASSETS
Stock 115.00 Debtors 351.70 Cash in Hand 211.88 678.58 CURRENT
LIABILITIES Creditors 324.25 Bank Overdraft 164.88 429.13 NET
WORKING CAPITAL (Current Assets Current Liabilities) 249.45 NET
ASSETS EMPLOYED (Fixed Assets + Working Capital) 983.45 Finance By:
Owners Capital 800.00 Net Profit 153.45 953.45 Debentures 30
CAPITAL EMPLOYED Zawada Electronics TASK 1 FIXED ASSETS Property
180,000 Machinery 120,000 300,000
$ FIXED ASSETS Property 180,000 Machinery 120,000 300,000 CURRENT
ASSETS Stock 80,000 Debtors 40,000 Cash in Hand 20,000 140,000
CURRENT LIABILITIES Creditors NET WORKING CAPITAL (Current Assets
Current Liabilities) 100,000 NET ASSETS EMPLOYED (Fixed Assets +
Working Capital) 400,000 Finance By: Loan Capital 250,000 Share
Capital 50,000 Reserves CAPITAL EMPLOYED TASK 2 FIXED ASSETS Land
790,000 CURRENT ASSETS Stock 19,000
$ FIXED ASSETS Land 790,000 CURRENT ASSETS Stock 19,000 Cash in
Hand 31,000 50,000 CURRENT LIABILITIES Overdraft 129,000 NET
WORKING CAPITAL (Current Assets Current Liabilities) (79,000) NET
ASSETS EMPLOYED (Fixed Assets + Working Capital) 711,000 Finance
By: Bank Loan 542,000 Share Capital Reserves 90,000 Retained Profit
29,000 CAPITAL EMPLOYED TASK 3 FIXED ASSETS Vehicles 194.1 163.5
Land 4,340.5 3953.3 4,534.6
2007 $ (m) 2006 $ (m) FIXED ASSETS Vehicles 194.1 163.5 Land
4,340.5 3953.3 4,534.6 4,116.8 CURRENT ASSETS Stock 426.3 374.3
Cash 420.1 767.8 846.4 1,142.1 CURRENT LIABILITIES Overdraft
1,606.2 2,017.0 NET WORKING CAPITAL (Current Assets Current
Liabilities) (759.8) (874.9) NET ASSETS EMPLOYED (Fixed Assets +
Working Capital) 3,774.8 3,241.9 Finance By: Share Capital 629.2
582.9 Reserves 1,019.0 620.8 Long Term Liabilities 2,126.6 2,038.2
CAPITAL EMPLOYED TASK 4 Imperial Tobacco PLC
FIXED ASSETS 6,255 4,982 CURRENT ASSETS Stock 998 789 Debtors 1,254
1,067 Cash 501 305 2,753 2,161 CURRENT LIABILITIES 3,172 3,002 NET
WORKING CAPITAL (Current Assets Current Liabilities) (419) (841)
NET ASSETS EMPLOYED (Fixed Assets + Working Capital) 5,836 4,141
Finance By: Bank Loan 4,695 3,543 Total Equity 1,141 598 CAPITAL
EMPLOYED Extension Task FIXED ASSETS Property 1,500 Machinery 500
2,000
$ FIXED ASSETS Property 1,500 Machinery 500 2,000 CURRENT ASSETS
Stock 250 Debtors 30 Cash 200 480 CURRENT LIABILITIES Creditors
Overdraft 70 320 NET WORKING CAPITAL (Current Assets Current
Liabilities) 160 NET ASSETS EMPLOYED (Fixed Assets + Working
Capital) 2,160 Finance By: Mortgage Debentures Reserves 60 Bank
Loan 100 Share Capital 1,000 CAPITAL EMPLOYED Extension Task Past
Paper Question BBT
$ FIXED ASSETS 28,500 CURRENT ASSETS Stock Debtors 28,000 Cash
2,000 30,000 CURRENT LIABILITIES Creditors Y Y = 48,000 Short-Term
Borrowing 48,000 NET WORKING CAPITAL (Current Assets Current
Liabilities) (18,000) NET ASSETS EMPLOYED (Fixed Assets + Working
Capital) 10,500 Finance By: Loan Capital Retained Profit 8,500
Share Capital CAPITAL EMPLOYED Limitations of Balance Sheet
Balance Sheets are static documents financial position can change
next day The value of assets on BS are only estimates, the true
value is not known until the asset is sold Not all assets,
especially intangible ones, are included in the balance sheet, e.g.
Football Players Uses of Balance Sheets We can see the Working
Capital figure to show the amount of money available to the
business for the day-to-day running of the bus Capital Employed
figure can indicate the size of a firm for potential investors The
asset structure can be analysed to see if there is too much
OVERTRADING in stocks or whether they are trying to expand with
more fixed assets Which of the following can be found on a balance
sheet? Next
Cash Expenses Sales Revenue Debtors Values 1 10 2 20 Inflow
Creditors Share Capital Fixed Assets 3 30 4 40 5 50 Reserves
Purchases Bank Loan Overdraft 6 60 7 70 8 80 9 90 Building Vehicles
Net Flow Machinery 10 100 11 110 Which of the following can be
found on a balance sheet? Next 17