Balance Sheet

A Balance Sheet is a way of assessing your net worth by your assets less your liabilities.

Balance sheets are used to give an overall picture of your net worth (equity) you have in your (business).  

This is done by working out your assets (positive, inflow) of money less your liabilities your (negative, outflow) of Money  

Balance sheet are used by all financial intuition to do an evaluation, of your net worth for such things as loan, leasing to see if you can repay the money they are leading to you 

Assets

Assets are item which has a positive monetary value which is owed by the person (or business) an Example would be Bank Account, Equipment, property, motor Vehicle, etc. this appear on the balance sheet as a debit balance 

Current Assets

Current Assets are liquid assets which can be turned to in cash very quickly especially under 12 months. E g cash, stock, debtors

Non current Assets

Non Current Assets(fixed) are assets which are intended to be keep long that 12 months Eg property Equipment 

Liability

Liability  are item which have a negative monetary value which are owed to other which have a claim on our assets, E g creditor, bank loans, Etc this appears on the balance sheet as a Credit Balance

Current Liability

Current Liability are liability which we will need to repay in the next 12 months E g, creditor  

Non current Liability

Non Current Liability are liability which will be paid off longer than 12 month E g 5 Bank loans

Equity (proprietorship) – is the difference between assets less liability. This appears on the balance as either debit or credit. A credit balance means that you have an investment in the assets whereas a debit balance means you liability own all of the assets and more. 

Proprietorship = Assets – Liability 

When all these are put together in a statement this is called a balance sheet. This is normally done at a set time & date E g Month End or Financial year end  

The other report which works with the balance sheet is the profit and loss statement. This is a income & expense statement of what has happen in the business in the period just finished. The profit and loss works on a period of time, E g a year or month.