The Balance Sheet

•The Balance Sheet describes a business’s financial situation at a moment in time, or a snap shot

•The left side details the assets a business owns
•The right side details how those assets were acquired (Liabilities + Shareholder Equity)
Both sides must always equal


How Loans Effect a Balance Sheet

•You need a loan to help fund your business
•The bank lends you $100 and expects and interest payment of 10%
•A long term loan that includes interest known as Notes Payable



Two Types of Owners

•People the business owes money to (Liabilities)
•The part of the business the owner owns (Owner’s Equity)
Assets = Liabilities + Owner’s Equity

Inventory and The Balance Sheet

•Inventory consists of products that you sell.
•When you buy inventory you decrease the value of your cash.
•$50 of inventory buys you:
- $ 35 for 50 sheets of paper
- $15 in markers and colored pencils



First Day in Business

•You draw 40 caricatures for $2 a piece
•$80 in total sales
•Unit Cost = Price of inventory to create 1 finished good
- $50 in inventory produces 50 caricatures
•Cost of Goods Sold ($40) = Units Sold (40) * Unit Cost ($1)
•Gross Profit ($40) = Sales ($80) – COGS ($40)


Record First Day on Balance Sheet

•Cash $230 = Prev. Cash $200 – Inventory $50 + Sales $80
•EWD $40 = Sales $80 – COGS $40




Time to Expand

•You increase your price to $5 per caricature
•Rent a space at the mall for $80 per day
•Buy a sign and easel for $50
•Buy $50 in raw material inventory
Sell 60 caricatures for $300 in sales





Explain the Changes

•Cash $350 = Prev Cash $230 – Expenses $130 – Inventory $50 + Sales $300
Earnings Week Ending $110 = Expenses -$130 – COGS $60 + Sales $300



Second Week in Business

•You decide to rent the mall booth for 3 days $240
•Spend $150 on Raw Materials
•Use $25 of Raw Materials to create Picture Books
•You sell 125 caricatures, but no picture books


Income Statement from Weekend

•Remember to subtract ending inventory
•Move Net Profit to Earnings Week to Date.




Over to the Balance Sheet

•Cash $585 = Prev. Cash $350 – Inventory $150 – Rent $240 + Sales $625
•EWTD $260 = Sales $625 – COGS $125 – Expenses $240
•Finished Goods
•Retained Earnings




One Last Development

•Friend offers to buy picture books for $50 on credit (Accounts Receivable)
•Mall operator wants ½ up front $120 (Pre Paid Expense)
•Check into Accounts Payable



What Happens if Debt isn’t Paid

•Remove amounts in Accounts Receivable
•Delete the same amount from Earnings Week to Date.
Don’t touch Retained Earnings





























Последнее изменение: вторник, 14 августа 2018, 08:29