SCENARIO 1:
ASSETS
Why Does the Balance Sheet Balance?
LIABILITIES
Cash
$ 50
Total Assets
$ 50
+
EQUITY
Total L + E
$ 0
ASSETS = LIABILITIES + EQUITY
-­‐You earn $50 in t ips serving tables. This is an asset of $50 cash.
-­‐The Balance S heet is NOT balanced © Bus 1220E/ 1299E, Ivey
SCENARIO 1:
© Bus 1220E/ 1299E, Ivey
SCENARIO 2:
ASSETS
LIABILITIES
Cash
$ 50
Total Assets
$ 50
+
EQUITY
$ 50
Total L + E
$ 50
ASSETS
LIABILITIES
Cash
$ 150
Total Assets
$ 150
ASSETS = LIABILITIES + EQUITY
+
EQUITY
$ 50
Total L + E
$ 50
ASSETS = LIABILITIES + EQUITY
-­‐To balance, y ou must allocate $50 under Equity, as this is money y ou earned
-­‐You t ake out a $100 bank loan. This is an Asset of $100 cash.
-­‐The Balance S heet is NOT balanced © Bus 1220E/ 1299E, Ivey
SCENARIO 2:
SCENARIO 3:
ASSETS
Cash
Total Assets
© Bus 1220E/ 1299E, Ivey
LIABILITIES
$ 150
$ 150
$ 100
Total L + E
+
EQUITY
$ 50
$ 150
ASSETS
LIABILITIES
Cash
$ 150
Watch
$ 100
Total Assets
$ 150
$ 100
+
EQUITY
$ 50
Total L + E
$ 150
ASSETS = LIABILITIES + EQUITY
ASSETS = LIABILITIES + EQUITY
-­‐To balance, y ou must allocate $100 under Liabilities, as this is money y ou borrowed
-­‐You buy a $100 w atch. The $100 is moved from cash t o w atch.
-­‐The Balance S heet IS balanced, and all assets are accounted for. The Balance S heet must ALWAYS balance!!
© Bus 1220E/ 1299E, Ivey
© Bus 1220E/ 1299E, Ivey
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