The Balance Sheet Made easy

How to set out a Balance Sheet.

Use with the ‘best selling guide’.

Balance Sheets are ALWAYS set out in the same way. You must learn this, and then it is easy to answer questions on them.

We always start with Fixed Assets.

Theses are things you own and will kep fo more than a year.

Fixed AssetsBuildings 1,000,000Machines 500,000Vehicles 150,000 Fixtures & Fittings 50,000

1,700,000

In limited Companies you will usually see them as a total rather than itemeised

WHY?

Fixed Assets 1,700,000

Fixed Assets 1,700,000Less Depreciation 200,000

Net book Value 1,500,000

We then need to subtract the depreciation. This means the Bal Sheet reflects the true value of the assets.

We then add in any intangible assets. E.G. Trademarks, brands or goodwill

Fixed Assets 1,700,000Less Depreciation 200,000

Net book Value 1,500,000+ Intangible assets 500,000

2,000,000

Then you add in current assets. Things you own but will use up within the year.

Fixed Assets1,700,000

Less Depreciation200,000

Net book Value1,500,000

+ Intangible assets500,000

2,000,000Current AssetsStock

100,000Debtors

400,000Cash

200,000

700,000

Then you subtract the current liabilities. Things you owe but will pay within the year.Fixed Assets

1,700,000Less Depreciation

2,000,000Net book Value

1,500,000+ Intangible assets

500,000

2,000,000Current AssetsStock

100,000Debtors

400,000Cash

200,000

700,000Less: Current LiabilitiesCreditors

(150,000)Overdraft

(50,000)

Next we subtract current liabilities from the current assets. This gives us Working Capital

Fixed Assets1,700,000

Less Depreciation200,000

Net book Value1,500,000

+ Intangible assets500,000

2,000,000Current AssetsStock

100,000Debtors

400,000Cash

200,000

700,000Less: Current LiabilitiesCreditors

(150,000)Overdraft

(50,000)Working Capital

500,000

Fixed Assets1,700,000

Less Depreciation200,000

Net book Value1,500,000

+ Intangible assets500,000

2,000,000Current AssetsStock

100,000Debtors

400,000Cash

200,000

700,000Less: Current LiabilitiesCreditors

(150,000)Overdraft

(50,000)Working Capital

500,000Net Assets

2,500,000

To finish the top half we add working capital to the fixed assets. This gives us Net Assets.

The 2nd ½ shows how all of this was paid for. Loan, Owners capital and reserves

Fixed Assets1,700,000

Less Depreciation200,000

Net book Value1,500,000

+ Intangible assets500,000

2,000,000Current AssetsStock

100,000Debtors

400,000Cash

200,000

700,000Less: Current LiabilitiesCreditors

(150,000)Overdraft

(50,000)Working Capital

500,000Net Assets

2,500,000Shareholders fundsShare Capital

1,500,000Reserves

700,000Bank loan

300,000Capital Employed

2,500,000

Capital Employed is the same as Net Assets. They BALANCE!

Fixed Assets 1,700,000Less Depreciation 200,000Net book Value 1,500,000+ Intangible assets 500,000

2,000,0002,000,000

Current AssetsStock 100,000Debtors 400,000Cash 200,000

700,000Less: Current LiabilitiesCreditors (150,000)Overdraft (50,000)Working Capital 500,000

500,000Net Assets 2,500,000

2,500,000

Shareholders fundsShare Capital 1,500,000Reserves 700,000Bank loan 300,000Capital Employed 2,500,000

2,500,000