Diploma in Bookkeeping
Balance sheet
2
Contents
3 Lesson outcomes
3 Introduction
4 Components of the balance sheet
6 Structure of the balance sheet
8 Creating a balance sheet
11 References
3
Lesson outcomes
By the end of this lesson, you should be able to:
• Identify the balance sheet.
• Describe the format of a balance sheet.
• Create a balance sheet from the trial balance in Excel.
Introducción
Benjamin Franklin says an investment in knowledge pays the best interest. So, I applaud you for investing your time into
getting your professional diploma in bookkeeping. If monitoring your financial health and making better decisions regarding
your business and personal finances are some of your top priorities, then this is the lesson for you. Today we get up close
and personal with one of the key statements in the annual financial statements fondly known as the balance sheet or
statement of financial position.
“Time is more value than money you can get more money, but you cannot get more time”.
- Jim Rohn
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Components of the balance sheet
What is a balance sheet?
• Statement of financial position.
• Picture of financial position at a point in time.
Structure of the balance sheet:
Assets
• What the business owns.
• Use in operations.
• Non-current vs current.
• Intangible vs tangible.
Non-current assets
• Carrying value
o Historical cost
o Adjustments
o Book value
• Adjustments
o Depreciation
o Impairment
• Examples
o Property
o Plant
o Equipment
o Investments
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Current assets
• Carrying value
o Cost
o Adjustments
• Adjustments
o Allowance for doubtful debts
o Stock write-down
• Examples
o Debtors
o Inventory
o Cash
• Tangible
o Physical assets
o Can be seen and touched
• Intangible
o Cannot be seen or touched
Equity
• Money owed to owners.
• Owner’s equity to fund assets.
• Retained income is the accumulated profits/losses.
Liabilities
• What the business owes.
• Non-current vs current.
• Loans, creditors, accruals.
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Structure of the balance sheet
Layout of the balance sheet
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Why does it balance?
• Assets funded by internal and external sources of finance.
• If liquidating the sufficient assets to cover debt.
• Demonstrates importance of accounting equation.
Importance of a balance sheet
1. Assess financial position
2. Evaluate financial health
3. Assess risks of a business
4. Identify trends
5. Comparison with other businesses
6. Project future earning potential
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Creating a balance sheet
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References
• Berry, T., n.d. How to cash flow forecast. [Online] Available at:
[Link]
• Bragg, S., 2020. What is cash flow forecasting? [Online] Available at:
[Link]
• Business Victoria, 2020. Cash flow forecasting. [Online] Available at:
[Link]
forecasting
• CFI, n.d. Forecasting cash flow. [Online] Available at:
[Link]
• CFI, n.d. Monthly cash flow forecast model. [Online] Available at:
[Link]
model/
• Freeman, D., 2008. Industrial: Sales forecast. [Online] Available at:
[Link]
• Gillespie, M., 2018. What is cash flow forecasting? [Online] Available at:
[Link]
flowforecasting/#:~:text=A%20cash%20flow%20forecast%20is%20a%20projection%20of,cash%20flow%
20forecast%20is%20called%20cash%20flow%20forecasting
• Skrobak, J., 2013. Sales & Operations Planning. [Online] Available at:
[Link]
• Standard Bank, n.d. Free cash flow forecast spreadsheets. [Online] Available at:
[Link]
[Link]
• tutor2u, n.d. Cash flow forecasting - example. [Online] Available at:
[Link]
• University of Exeter, 1998. Famous forecasting quotes. [Online] Available at:
[Link]
[Link]#:~:text=%20Famous%20Forecasting%20Quotes%20%201%20%22Those%20w
ho,serves%20as%20a%20warning%20of%20the...%20More%2
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