Chapter 2
The Balance Sheet!
Quiz on Friday Sep 12
Preparing a Balance
Sheet!
• There are 6 steps for preparing a
Balance Sheet.
Step 1: Write the headings
•Who: Which company?
•What: Balance sheet? Or Income
statement?
•When: Date and Year
Preparing a Balance
Sheet!
•Step 2: Write “Assets” at the top of
the left side column. Underline
“Assets”. Then write in the individual
assets on the left side. (under “Assets”)
Preparing a Balance
Sheet!
•Step 2:
•Usually the order of Assets follows
“liquidity” of the asset.
is
listed first, AR next, Supplies
(examples are factory supplies like
lubricant and office supplies like
printer and paper) next. Delievery
Truck, equipment and buildings are at
the bottom of the asset list.
Preparing a Balance
Sheet!
•Step 3: Write “Liabilities” at the top
of the right side column. Use same
font and boldness as “assets”.
Underline “Liabilities”. Then write in
the individual liabilities on the the right
side. (under “Liabilites”)
Preparing a Balance
Sheet!
•Step 3:
•Usually the liabilities are listed in
the order in which they will
paid. Supplier’s names are listed in
alphabetical order.
•Draw a line below the last liability
amount to indicate that you are
adding up the dollar amounts to
come up with “Total Liabilities”
Preparing a Balance
Sheet!
•Step 4: Beneath the liabilities, write in the
subheading “Owner’s Equity” and format it
so it looks like the subheadings for “Assets”
and “Liabilities”. Then write in the owner’s
name plus the word “Capital”. The dollar
amount is always on the right side of the
item.
Preparing a Balance
Sheet!
•Step 5: Complete the balance sheet
by writing in the final totals (add up
the amounts to get total)on the first
fully open line. The two final totals
must be on the same line. The two
totals must be the same amount.
Preparing a Balance
Sheet!
•Step 5:
•Place a single ruled line above
and a double ruled line below
each of the two totals.
•“Total Assets” is on the left side and
“Total Liabilities and Equity” on the
right side.
•Step 6: You have to put $ sign in total
amount and in first amount.
Basic Record Keeping Practice
When to abbreviate:
•We can not use abbreviations
of names on financial statements
except when a business name
includes an abbreviation.
Basic Record Keeping Practice
Use of Columnar Paper: We do not use
commas or decimal when using columnar
paper.
•Dash (-) is used when the dollar amount
does not have any cents. (P26)
•Usually only one number should be filled
in one square unit except cents area
and when the number represents
thousand or higher number.
Basic Record Keeping Practice
Use of Ruled Lines:
•If you have to total amounts in a
column, a single line is drawn beneath
the column and the total amount is
placed beneath this single line as
shown in Page 26.
•If a total happens to be a final total,
then you should double line the final
total.
Basic Record Keeping Practice
Use of Ruled Lines:
•On most balance sheet, in order to place
the two final totals on the same line, you will
have to leave one or more blank lines
between the final total number and the last
number. (P27)
•Show on the board the correct method and
incorrect method (P27)
•Your writing must be neat!
•Go over #1 of yesterday homework.
Classwork / Homework
-Answer Review Questions (Page 28) #1,
7, 8, 10,
-Answer Exercise Questions (Page 28) #
2, 3,