Balance Sheets for WJEC
GCSE Business
Topic Outcomes:
All will be able to define
“Net Assets and Capital
Employed”.
Most will be able to
explain in one sentence
what a Balance Sheet is
showing us!
Some will be working
towards discussing why a
potential investor in a
business will want to see
its Balance Sheet
Level 1
Grade E
Knowledge
Level 2
Grades D to C –
Analysis of an issue
Level 3
Grades B to A* Judgement and
Evaluation
A Balance Sheet is …
(Key Term)
A Balance Sheet summarises:
Where ALL the money has been SPENT (on the top
half of the sheet) as well as
Where ALL the money INVESTED in the company
has come FROM (on bottom half of the sheet)
The two halves of the balance sheet will
ALWAYS have the same figure (BALANCE) at
the bottom – hence the name (Balance Sheet)!
A Balance Sheet is …
(Key Term)
A Balance Sheet tells
stakeholders in a company
how wealthy a company is at a
SINGLE POINT IN TIME.
Wealth is assets, money, profits
MINUS anything a business owes!
Minty Ltd Balance Sheet as at 31st December 2010
NET ASSETS
(Things they own minus anything
they need to repay inside a year)
Note down these
key terms!
CAPITAL EMPLOYED
(Where the money has come from to help
pay for their assets/ possessions)
(Minty – Word Doc called Balance Sheet WJEC
2011 Resource Activity Cards)
Tasks
Using the sheets provided, we are going to
learn about the STRUCTURE of the
balance sheet and how it is laid out at the
simplest level.
Let’s …
1.
Look at Minty Ltd together,
2.
Complete activities called: Pinky Ltd and Genie Ltd,
3.
Write in the definitions in the boxes and gaps provided,
4.
Then we are ready to look more closely at the detail in the
balance sheets….
Notes: Two key terms…
• Fixed Assets - Items the firm owns that will
last MORE than a year – like buildings or
computers.
• Current Assets – Items the business OWNS
or is OWED that will be turned in to CASH
that is used up within a year e.g. stock;
debtors; cash in the current bank account.
Notes : Two key terms…
• Current Liabilities - Items the firm OWES
that it will have to PAY off in LESS than a
year – such as its TRADE CREDITORS.
• Working Capital – Current Assets MINUS
Current Liabilities – in other words the
money the business has working for it on a
SHORT TERM day to day basis.
Key Terms…
• Net Assets - The total of HOW all the
capital in the business is being used. It is
found by adding WORKING CAPITAL to
FIXED ASSETS.
• Net Assets are the total of the TOP HALF
of the Balance Sheet!
Notes : Two key terms…
• Long Term Liabilities - Items the firm OWES
that it will have to PAY off in MORE than a
year – such as its mortgage or a long term
bank loan.
• Share or Owners’ Capital – The money
invested in the business by its owners.
Notes : Two key terms…
• Retained Profit - Profit the company has
chosen to KEEP in the business for future
investment or expansion rather than paying
it out as dividends.
• Capital Employed – The total of all the
money invested in the business – the
bottom half of the balance sheet.
Next – let’s look at the various sections
of the balance sheet in more detail….
• We’ll look at Genie Ltd together
• Then you can test yourselves by working
out the gaps for Jelly Bean Ltd and Piggy
Ltd.
Notes: Two more key terms…
• Trade Debtors - where people/ customers
owe you money because your business
has sold them goods on credit (usually in
business, if you sell goods to another
business, you give them 30 days to pay)
• Trade Creditors – when YOU/ YOUR
business BUYS its SUPPLIES on TRADE
CREDIT (again usually 30 days to pay).
More Current Assets….
• Stock - is the value of goods the business
has left on its premises when the balance
sheet is written. It is a best estimate of
what the goods in a shop or factory are
worth if they were sold off in the next 12
months.
Now – let’s test our understanding of
the balance sheet in more detail….
• Now you can test yourselves by
working out the gaps for Jelly Bean
Ltd and Piggy Ltd.
Challenge question - imagine….
• In the following year, imagine Genie Ltd
had a really bad year and their sales
and profits fall by £2,000 so profits end
up being £3,000.
• What items might change by £2,000 on
the opposite side of the balance
sheet?
(as we know the balance sheet always has to balance)
BIG Question!
• If someone was thinking of investing in a
business, WHY might they be interested in
seeing the balance sheet?
• Are there any SPECIFIC things you think
they’d look at on the balance sheet?
Explain why you think this….
Review of Topic Outcomes …
All will be able to define
“Net Assets and Capital
Employed”.
Most will be able to
explain in one sentence
what a Balance Sheet is
showing us !
Some will be working
towards discussing why a
potential investor in a
business will want to see
its Balance Sheet
Level 1
Grade E
Knowledge
Level 2
Grades D to C –
Analysis of an issue
Level 3
Grades B to A* Judgement and
Evaluation
Using and Interpreting
Balance Sheets
Using and Interpreting Balance Sheets:
Outcomes
All will be able to define
“Liquidity”
Most will be able to
explain why being able to
calculate liquidity of a
business is useful.
Some will compare
liquidity of different
businesses and offer
recommendations.
Level 1
Grade E
Knowledge
Level 2
Grades D to C –
Analysis of an issue
Level 3
Grades B to A* Judgement and
Evaluation
Liquidity
Liquidity means HOW QUICKLY a
business has access to CASH* in order
to be able to run day to day.
(* by cash, we mean bank account
balances and cheques too!)
It’s important to know the liquidity of a
company because ….?
If you are the owner or thinking of investing
in it, a GOOD business has GOOD liquidity
– meaning it can always PAY its bills!