Balance Sheets
IB BUSINESS Unit 3.5
What is a Balance Sheet
• Balance sheets provide a snap shot of the
assets and liabilities of a business at a
point of time
• It shows what the business owns, is owed
and owes:
– Owns – Assets such as buildings, stock and
cash
– Is Owed – Money from debtors
– Owes – Money to creditors and the bank
– Owes – To the investors and owners of the
business (they own the profit)
£
£
£
FIXED ASSETS
Premises
2
Equipment
4
Vehicles
4
10
CURRENT ASSETS
Stock
1
Debtors
1
Cash at Bank
2
4
6
6
CURRENT LIABILITIES
Creditors
NET WORKING CAPITAL
-2
NET ASSETS EMPLOYED
-2
8
Financed By
SHAREHOLDERS’ FUNDS
Share Capital
2
Reserves
2
4
4
4
LONG TERM LIABILITIES
Bank Loan
CAPITAL EMPLOYED
8
£
£
£
FIXED ASSETS
Land & Buildings
120
Equipment & Vehicles
35
Furniture & Furnishings
10
165
CURRENT ASSETS
Stock
35
Debtors
4
Cash
2
41
CURRENT LIABILITIES
Creditors
15
Bank Overdraft
5
20
NET WORKING CAPITAL
21
NET ASSETS EMPLOYED
186
Finance By:
Share Capital
98
Retained Profit
20
Bank Loan
68
CAPITAL EMPLOYED
186
£
£
£ 2001
FIXED ASSETS
Shop Premises
50,000
Fixtures & Fittings
12,000
Equipment
22,000
Van
10,000
94,000
CURRENT ASSETS
Stock
12,000
Debtors
5,000
Cash in Bank
1,000
18,000
CURRENT LIABILITIES
Overdraft
8,000
Creditors
4,000
12,000
NET WORKING CAPITAL
6,000
NET ASSETS EMPLOYED
100,000
Finance By:
Share Capital
50,000
Reserves
10,000
Retained Profit
60,000
LONG-TERM LIABILITIES
Long-term Loans
40,000
Medium-term Loans
40,000
CAPITAL EMPLOYED
100,000
£
£
£ 2001
FIXED ASSETS
Shop Premises
60,000
Fixtures & Fittings
15,000
Equipment
25,000
Van
10,000
110,000
CURRENT ASSETS
Stock
14,000
Debtors
3,000
Cash in Bank
3,000
20,000
CURRENT LIABILITIES
Overdraft
0
Creditors
10,000
10,000
NET WORKING CAPITAL
10,000
NET ASSETS EMPLOYED
120,000
Finance By:
Share Capital
50,000
Reserves
15,000
Retained Profit
5,000
70,000
LONG-TERM LIABILITIES
Long-term Loans
38,000
Medium-term Loans
12,000
50,000
CAPITAL EMPLOYED
120,000
E. BLYTON – TIMBER TRADING
£
£
FIXED ASSETS
Machinery
284.00
Van
450.00
734.00
CURRENT ASSETS
Stock
115.00
Debtors
351.70
Cash in Hand
211.88
678.58
CURRENT LIABILITIES
Creditors
324.25
Bank Overdraft
164.88
429.13
NET WORKING CAPITAL (Current Assets – Current Liabilities)
249.45
NET ASSETS EMPLOYED (Fixed Assets + Working Capital)
983.45
Finance By:
Owners Capital
800.00
Net Profit
153.45
953.45
Debentures
30
CAPITAL EMPLOYED
983.45
Zawada Electronics
TASK 1
$
$
FIXED ASSETS
Property
180,000
Machinery
120,000
300,000
CURRENT ASSETS
Stock
80,000
Debtors
40,000
Cash in Hand
20,000
140,000
CURRENT LIABILITIES
Creditors
40,000
40,000
NET WORKING CAPITAL (Current Assets – Current Liabilities)
100,000
NET ASSETS EMPLOYED (Fixed Assets + Working Capital)
400,000
Finance By:
Loan Capital
250,000
Share Capital
50,000
Reserves
100,000
CAPITAL EMPLOYED
400,000
TASK 2
$
$
FIXED ASSETS
Land
790,000
790,000
CURRENT ASSETS
Stock
19,000
Cash in Hand
31,000
50,000
CURRENT LIABILITIES
Overdraft
129,000
129,000
NET WORKING CAPITAL (Current Assets – Current Liabilities)
(79,000)
NET ASSETS EMPLOYED (Fixed Assets + Working Capital)
711,000
Finance By:
Bank Loan
542,000
Share Capital
50,000
Reserves
90,000
Retained Profit
29,000
CAPITAL EMPLOYED
711,000
TASK 3
2007 $ (m)
2006 $ (m)
FIXED ASSETS
Vehicles
194.1
163.5
Land
4,340.5
3953.3
4,534.6
4,116.8
Stock
426.3
374.3
Cash
420.1
767.8
846.4
1,142.1
1,606.2
2,017.0
1,606.2
2,017.0
NET WORKING CAPITAL (Current Assets – Current Liabilities)
(759.8)
(874.9)
NET ASSETS EMPLOYED (Fixed Assets + Working Capital)
3,774.8
3,241.9
Share Capital
629.2
582.9
Reserves
1,019.0
620.8
Long Term Liabilities
2,126.6
2,038.2
CAPITAL EMPLOYED
3,774.8
3,241.9
CURRENT ASSETS
CURRENT LIABILITIES
Overdraft
Finance By:
TASK 4 – Imperial Tobacco PLC
2007 $ (m)
FIXED ASSETS
2008 $ (m)
6,255
4,982
Stock
998
789
Debtors
1,254
1,067
Cash
501
305
2,753
2,161
CURRENT LIABILITIES
3,172
3,002
NET WORKING CAPITAL (Current
Assets – Current Liabilities)
(419)
(841)
NET ASSETS EMPLOYED (Fixed Assets
+ Working Capital)
5,836
4,141
Bank Loan
4,695
3,543
Total Equity
1,141
598
CAPITAL EMPLOYED
5,836
4,141
CURRENT ASSETS
Finance By:
Extension Task
$
$
FIXED ASSETS
Property
1,500
Machinery
500
2,000
CURRENT ASSETS
Stock
250
Debtors
30
Cash
200
480
CURRENT LIABILITIES
Creditors
250
Overdraft
70
320
NET WORKING CAPITAL (Current Assets – Current Liabilities)
160
NET ASSETS EMPLOYED (Fixed Assets + Working Capital)
2,160
Finance By:
Mortgage
500
Debentures
500
Reserves
60
Bank Loan
100
Share Capital
1,000
CAPITAL EMPLOYED
2,160
Extension Task – Past Paper Question BBT
$
FIXED ASSETS
$
28,500
CURRENT ASSETS
Stock
0
Debtors
28,000
Cash
2,000
30,000
CURRENT LIABILITIES
Creditors
Y Y = 48,000
Short-Term Borrowing
0
48,000
NET WORKING CAPITAL (Current Assets – Current Liabilities)
(18,000)
NET ASSETS EMPLOYED (Fixed Assets + Working Capital)
10,500
Finance By:
Loan Capital
0
Retained Profit
8,500
Share Capital
2,000
CAPITAL EMPLOYED
10,500
Limitations of Balance Sheet
• Balance Sheets are static documents –
financial position can change next day
• The value of assets on BS are only
estimates, the true value is not known until
the asset is sold
• Not all assets, especially intangible ones,
are included in the balance sheet, e.g.
Football Players
Uses of Balance Sheets
• We can see the Working Capital figure to
show the amount of money available to the
business for the day-to-day running of the
bus
• Capital Employed figure can indicate the size
of a firm for potential investors
• The asset structure can be analysed to see if
there is too much OVERTRADING in stocks
or whether they are trying to expand with
more fixed assets
Cash
Inflow
Reserves
Building
Expenses
Creditors
Purchases
Vehicles
Sales Revenue
Share Capital
Bank Loan
Net Flow
Debtors
Fixed Assets
Overdraft
Machinery
Which of the following can be found on a balance sheet?
Values
1
10
2
20
3
30
4
40
5
50
6
60
7
70
8
80
9
90
10
100
11
110
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