Make yourself a Balance Sheets butty

Balance Sheets are a key financial statement and learning the layout of these is a key to success in A Level Accounting. They are a snapshot at a point in time. However there is no way you can expect people to remember the layout is there?? Well, - there is and it involves Alchemy (magic).

Assets – things a business owns

– Liabilities things a business owes

= Capital – the owners investment When you make yourself a sandwich you have bread on the top and bottom to hold the filling in. Being an Accountant I’m a bit odd so I recommend a Current Sandwich! (or a ‘Butty’ to those Tutor2u northerners!)

Bread Non Current Assets – usually kept for more than 12 months

Current Current Assets – to be turned into cash within 12 months

Current Less Current Liability – to be paid within 12 months

Bread Less Non Current Liabilities – do not need to be paid back within 12 months

= Net Assets (assets - liabilities)

You now have most of the key headings in place so it’s a question of deciding what goes where! This is where practice comes in!

Capital

The Capital section is relatively straightforward: -

Opening Capital – what the business was worth at the start of the year

Add net profit (profit makes the business worth more)

Add capital injections (when the owner puts money in it is worth more)

Less drawings (taking money out makes it worth less)

Closing capital

Key notes to remember

• Show all workings – some adjustments are complex and you need to show us how you got to your answer – no workings means you just lost 5 marks (or a full grade) – an easy mark!
• A balance sheet is at a point in time. The title is quite often in the question unless it tells you the balance sheet is wrong! An easy mark!
• Underline all the key headings and use the columns – it is not written like a shopping list!
• Net Current Assets (working capital) – this is the total of your current assets minus the total of your current liabilities. It goes in just after current liabilities. Watch out for a negative figure as it then becomes Net Current Liabilities!
  
• Depreciation is taken away from Non Current Assets: – is your car worth more the more you use it? Of course not! Easy mark - dont add it!
• Don’t move things around until it balances – you will probably reduce the marks you are getting and waste lots of time!
• Practice past papers – use the ones in class but also download some from your exam board website!
• Final note– get a printed copy of a balance sheet (there is one below if you wish ) and cut it up line by line and then practice putting them in order. Keep it in an envelope to keep it neat. If you do this once a day for three/four weeks you will crack it!

Nial Satis - Balance Sheet at 31^st Dec 2012

£ £ £

Non-Current Assets

Premises at Cost xxx

Less Accumulated Depreciation xxx xxx (a)

Motor vehicles at cost xxx

Less Accumulated Depreciation xxx xxx (b)

a + b = c xxx (c)

Current Assets

Closing Inventory (Stock) xxx

Trade Receivables (Debtors) xxx

Prepayment of expenses xxx

Bank xxx

Cash xxx xxx (d)

Less Current Liabilities

Trade Payables xxx

Accrual of expenses xxx

Bank overdraft xxx (xxx) (e)

Net Current Assets (d) – (e) xxx = (f)

Less Non-Current Liabilities

Loans (xxx) (h)

Net Assets (c + f – h) xxx (i)

FINANCED BY

Opening capital xxx

Add Profit for the year (from Income Statement) xxx

Add Capital Injections xxx

Less Drawings (xxx)

Closing Capital xxx (i)

@nialsatis