SWIN BUR . NE . Swinburne Online Week 3: Balance Sheet What is a Balance Sheet? The Balance Sheet is a financial statement that details the entity's assets, liabilities and equity as at a particular point in time - the end of the reporting period. More specifically, the balance sheet summarises at a point in time: · Assets - what the entity owns (or controls) as at a particular date · Liabilities - the external claims on the entity's assets (what is owed) . Equity - the internal claim on the entity's assets (what the owner is entitled to). Note that this is also referred to as "owner's equity" Please see below an example of a balance sheet (taken from the textbook, page 160). Three key things to note: · The balance sheet is always produced at a point in time (on a specific day). In the example below, the balance sheet is produced as at 30 September 2016 (so all figures reflect the balances of assets, liabilities and equity as at that particular date) . The balance sheet must always balance. Total Assets ($87,770) will always equal Total Liabilities ($51,400) plus Total Equity ($36,370). Note that given this relationship, Total Assets ($87,770) minus Total Liabilities ($51,400) will equal Total Equity ($36,370). The latter relationship reflects how the balance sheet is presented, but note that they are both correct (as they are both mathematically right: if A = L + E, then A - L = E). . Note that Net Assets = Total Assets - Total Liabilities Advantage Tennis Coaching (ATC) Balance sheet as at 30 September 2016 Assets Current assets Cash $71270 Accounts receivable 6 800 $78070 Non-current assets Office furniture 3 200 Office equipment 6.500 9 700 Total assets $87 770 Liabilities Current liabilities Accounts payable 1 400 Non-current liabilities Loan 50 000 Total liabilities 51 400 Net assets $36370 Owner's equity Capital - N Cash 20 000 Profit 16370 Total equity $36370
SWIN BUR · NE . Swinburne Online What are the key components of a balance sheet? The key components of a balance sheet, including how they are defined and relevant examples, have been summarised in the table below. A discussion of the difference between current and non-current assets and liabilities is included after the table. Component Asset - an economic resource which the entity controls, as the result of a past event Liability - a present obligation to transfer an economic resource (to another entity) as a result of a past event Equity - the amount left after you Definition / criteria . Present economic resource that has potential to produce economic benefits (e.g. if own property, can use it to conduct business which is a benefit) · Controlled by entity / company (generally, if you own the asset, you can control it but there are exceptions) . The resource must be the result of a past event (e.g. the result of a purchase, which is a past event) · A present obligation to