how accountants use balance sheets account form report form heading assetsliabilities and capital...

How Accountants Use Balance Sheets Account Form Report

Formheading

ASSETS Liabilities and Capital

HEADINGS

Assets

Liabilities and

Capital

Classified Balance Sheet A classified balance sheet has the data grouped

according to major categories Current Assets: will be converted into cash

(or used up) during the next year Fixed Assets (or plant and equipment): long-

term assets held for their usefulness in producing goods or services

Current Liabilities: short-term debts, payment of which is expected to occur within one year of the date of the balance sheet

Long-term liabilities: debts of the business that are not due within one year

8.3 Classified Balance Sheet Cont…

Capital –the owner’s claim on assets Beginning balance Increase or decrease through profit or loss Decrease through owner withdrawals

(drawings/dividends) Ending Balance

Inner columns The two balancing totals: total assets and total

liabilities plus owners equity

Working CapitalWorking Capital

The difference between the current assets and the current liabilities of a businessObviously the more working capital there is, the better off a business is.

Comparative Financial Statement A comparative financial statement

presents figures for successive years in side-by-side columns (in the same way that the income statement does) see page 272 in your textbook

Look for items showing unusual change – relate items to each other example, if sales is going up why is bank loan

also increasing? If advertising is increased why isn't equity?

Trend Analysis

APOLLO PRINTINGWORKING CAPITAL

1998 to 2002

1998 1999 2000 2001 2002$19 626 $18 993 $20 584 $16 761 $19 970

100% 97% 105% 85% 102%

Common-Size Statements On the income statement every figure is

expressed as a percentage of sales Therefore if rent expense is 46 percent, we

know that for each dollar of sales 46 cents go to rent expense

For common-sized balance sheets every figure is expressed as a percentage of TOTAL ASSETS Therefore we divide every number by the

total assets*very useful for companies of different sizes