Statement of Financial Position (Balance Sheet)

Statement of Financial Position (Balance Sheet)

Topic C.1 Understand how businesses measure success 

What we will cover:

• Identify the purpose of a statement of financial position

• Understand the format of a statement of financial position

• Categorize total assets and liabilities using a statement of financial position

• Understand that a statement of financial position shows at a point in time:

  - How a business is funded (capital) How a business is using these funds (net assets)

Identify the purpose of a statement of financial position

This document shows what a business is actually worth at any particular time.

It is a snapshot of the business (taking a picture) here and now of what the business is worth.

It shows what the business owns (assets) and what it owes (liabilities)

Multiple Select

The Statement of Financial Position is A snapshot of how much the business is worth?

• True

• False

Assets Vs. Liabilities

Assets are items that the business owns.

Liabilities are what the business owes.

Open Ended

What is the difference between Assets and Liabilities?

Assets a Business typically owns:

• Stock

• Cash (Money in the bank)

• Trade receivables (Debtors)

• Machinerys

• Buildings

• Brand / Reputation / Loyalty

Multiple Select

Which of these assets can be quickly turned into cash, should the business have a cash-flow problem?

• Stock

• Cash

• Trade Receivables

• Machinery, Buildings

• Brand, Reputation, Loyalty

Liquid Assets

Stock, Cash, and Trade Receivables are known as liquid assets as they can be turned into cash easily.

Also known as Current Assets

Multiple Select

Which of these assets can take longer to be turned into cash, should the business have a cash-flow problem?

• Stock

• Cash

• Trade Receivables

• Machinery, Buildings

• Brand, Reputation, Loyalty

Fixed Assets

Fixed assets are long-term, physical assets such as plant and equipment. Fixed assets have a useful life of more than one year.

Liabilities

Typical Liabilities for a business

• Trade payables (creditors)

• Bank loan

• Overdraft

Multiple Select

Current liabilities are money that a business owes within 1 year, which of these do you think is a current liability?

• Trade Payable (Creditors)

• Bank Loan

• Overdraft

Long-term Liabilities

Long-term liabilities is money that a business owes which is repaid greater than a year. A good example of this for a business can be a bank loan or a mortgage.