BALANCE SHEET

CONTENT

1. Meaning of Balance Sheet
2. Items on a Balance Sheet
3. Uses of Balance Sheet
4. Classification of Items on a Balance Sheet
5. Distinction between Capital and Liabilities
6. Differences between Horizontal and Vertical Balance Sheets

Meaning of Balance Sheet

Balance Sheet is the financial position of an organization at any given point of time, e.g it shows what a business owns, (asset) those it owes, (liabilities) and the net worth (capital).

Items on a Balance Sheet

Items on a Balance Sheet are;

1. Assets e.g Plants and Machinery, Motor Vehicle, Land and Building, Freehold Premises, Furniture and Fitting, Stock, Cash, Debtor, Bank, Goodwill and prepayment.

2. Liabilities e.g Debenture, Long term loans, Short term loans, Overdrafts, Creditors and accrued expenses.

3. Capital = Net Profit – drawing.

Uses of Balance Sheet

(i) It provides information to prospective investors.

(ii) It gives the financial summary of a business.

(iii) It reveals the working capital of a business.