Balance sheet

In financial accounting, a balance sheet or statement of financial position is a summary of the financial balances of a sole proprietorship, a business partnership, a corporation or other business organization, such as an LLC or an LLP. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year. A balance sheet is often described as a "snapshot of a company's financial condition". Of the four basic financial statements, the balance sheet is the only statement which applies to a single point in time of a business' calendar year.

A standard company balance sheet has three parts: assets, liabilities and ownership equity. The main categories of assets are usually listed first and typically in order of liquidity. Assets are followed by the liabilities. ____________

Another way to look at the same equation is that assets equal liabilities plus owner's equity. Looking at the equation in this way shows how assets were financed: either by borrowing money (liability) or by using the owner's money (owner's equity). Balance sheets are usually presented with assets in one section and liabilities and net worth in the other section with the two sections "balancing."

A business operating entirely in cash can measure its profits by withdrawing the entire bank balance at the end of the period, plus any cash in hand. However, many businesses are not paid immediately; they build up inventories of goods and they acquire buildings and equipment. ­­­­­­­­_____________Often, these businesses owe money to suppliers and to tax authorities, and the proprietors do not withdraw all their original capital and profits at the end of each period. In other words businesses also have liabilities.

A balance sheet summarizes an organization or individual's assets, equity and liabilities at a specific point in time. Individuals and small businesses tend to have simple balance sheets. Larger businesses tend to have more complex balance sheets, and these are presented in the organization's annual report. ____________A balance sheet is often presented alongside one for a different point in time (typically the previous year) for comparison.

A personal balance sheet lists current assets such as cash in checking accounts and savings accounts, long-term assets such as common stock and real estate, current liabilities such as loan debt and mortgage debt due, or overdue, long-term liabilities such as mortgage and other loan debt. Securities and real estate values are listed at market value rather than at historical cost or cost basis. Personal net worth is the difference between an individual's total assets and total liabilities.

A small business balance sheet lists current assets such as cash, accounts receivable, and inventory, fixed assets such as land, buildings, and equipment, intangible assets such as patents, and liabilities such as accounts payable, accrued expenses, and long-term debt. _____________The small business's equity is the difference between total assets and total liabilities.

Guidelines for balance sheets of public business entities are given by the International Accounting Standards Committee (now International Accounting Standards Board) and numerous country-specific organizations/companies.

__________________Government organizations do not generally follow standards established for individuals or businesses.

If applicable to the business, summary values for the following items should be included in the balance sheet: assets are all the things the business owns; this will include property, tools, cars, etc.

Vocabulary:

Assets – активи

Liabilities – зобов'язання

Ownership equity – власність капіталу

Withdrawing –виведення (активів)

Comparison – порівняння

Common stock – звичайні акції

Real estate – нерухомість

Business entities – господарюючі суб'єкти

Applicable – застосовний

1. Complete the text with the following sentence:

a Large businesses also may prepare balance sheets for segments of their businesses.

b Balance sheet account names and usage depend on the organization's country and the type of organization.

c The difference between the assets and the liabilities is known as equity or the net assets or the net worth or capital of the company and according to the accounting equation, net worth must equal assets minus liabilities.

d In other words: businesses have assets and so they can not, even if they want to, immediately turn these into cash at the end of each period.

e Contingent liabilities such as warranties are noted in the footnotes to the balance sheet.

2. Read the text again and answer the following questions:

1 What are the main parts of balance sheet?

2 How the assets are finances?

3 Which balance sheet has large business?

4 Who gives deadlines for balance sheets?

5 What is the list of current assets for personal balance sheets?

6 What is the balance sheet?

7 How is the business operating entirely in cash can measure its profits?

8 What balance sheet summarizes?

9 What is the list of current assets for a small business balance sheet?

10 What is the difference between the assets and the liabilities?

3. Are the following statements true or false:

1 Liabilities equal assets plus owner’s equity

2 The small business's equity is the difference between total assets and total liabilities

3 Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its months

4 Personal net worth is the difference between an individual's total assets and total owner’s equity

5 Government organizations do not generally follow standards established for individuals or businesses

6 Contingent liabilities such as warranties are noted in the footnotes to the balance sheet.

7 Small businesses also may prepare balance sheets for segments of their businesses.

8 Often, these businesses owe loans to suppliers and to tax authorities

9 Larger businesses tend to have more complex balance sheets, and these are presented in the organization's annual report.

10 Guidelines for balance sheets of public business entities are given by the government.

4. Choose the best word to complete each sentence:

1 Securities and real ________values are listed at market value

A Property B estate C capital D things

2 A __________ sheet summarizes an organization or individual's assets, equity and liabilities at a specific point in time.

A balance B poise C equilibration D scales

3 Guidelines for balance sheets of public business entities are given by the International ___________ Standards Committee

A Calculation B Computation C Accounting D Finance

4 _________liabilities such as warranties are noted in the footnotes to the balance sheet.

A Occasion B Fraction C Shred D Contingent

5 A balance sheet is often described as a "snapshot of a company's financial __________"

A condition B situation C position D case

6 A small business balance sheet lists ________ assets

A actual B current C routine D operating

7 Personal net worth is the difference between an individual's total assets and total liabilities.

A company B personal C owners D individuals

8 Balance sheet account names and usage depend on the organization's country and the type of organization.

A company B organization C owners D individuals

9 If ________to the business, summary values for the following items should be included in the balance sheet: assets are all the things the business owns; this will include property, tools, cars, etc.

A applicable B applicative C application D apply

10 Receivable, and inventory, _______ assets such as land, buildings is the assets of the small business.

A aligned B leveled C fixed D even

Keys:

1.

1c

2d

3a

4e

5b

2.

1 A standard company balance sheet has three parts: assets, liabilities and ownership equity

2 Looking at the equation in this way show how assets were financed: either by borrowing money (liability) or by using the owner's money (owner's equity).

3 Larger businesses tend to have more complex balance sheets, and these are presented in the organization's annual report.

4 Guidelines for balance sheets of public business entities are given by the International Accounting Standards Committee (now International Accounting Standards Board) and numerous country-specific organizations/companies.

5 A personal balance sheet lists current assets such as cash in checking accounts and savings accounts, long-term assets such as common stock and real estate, current liabilities such as loan debt and mortgage debt due, or overdue, long-term liabilities such as mortgage and other loan debt.

6 In financial accounting, a balance sheet or statement of financial position is a summary of the financial balances of a sole proprietorship, a business partnership, a corporation or other business organization, such as an LLC or an LLP.

7 A business operating entirely in cash can measure its profits by withdrawing the entire bank balance at the end of the period, plus any cash in hand.

8 A balance sheet summarizes an organization or individual's assets, equity and liabilities at a specific point in time.

9 A small business balance sheet lists current assets such as cash, accounts receivable, and inventory, fixed assets such as land, buildings, and equipment, intangible assets such as patents, and liabilities such as accounts payable, accrued expenses, and long-term debt.

10 The difference between the assets and the liabilities is known as equity or the net assets or the net worth or capital of the company and according to the accounting equation, net worth must equal assets minus liabilities.

3.

1 F

2 T

3 F

4 F

5 T

6 T

7 F

8 F

9 T

10 F

4.

1 B

2 A

3 C

4 D

5 A

6 B

7 D

8 B

9 A

10 C

Individual work:

“Balance Sheet”

Completed by

Student from 305 FKbd group

Juliana Yarmolovych

Lviv 2012

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