BBI1O1
The Balance Sheet

The formal way of presenting the financial
position for a company is the balance sheet

A balance sheet is a statement showing the
financial position of a person, business, or
other organization
Balance Sheet Example
Features of the Balance Sheet
The Balance Sheet looks like the
Fundamental Accounting Equation
 A = L + OE
 Assets are on the left side and the liabilities
and owner’s equity are on the right side

Features of the Balance Sheet
A Three Line Heading is Used
 WHO? – The name of the individual,
business or other organization
 WHAT? – The name of the financial
statement (in this case the balance
sheet)
 WHEN? – The date on which the
financial position is determined

Features of the Balance Sheet
The assets are listed in order of their
liquidity
 Liquidity means the order in which the
assets are converted into cash
 Cash on hand, bank balances are first,
whereas equipment & building are listed
later (they are normally not converted to
cash, but used in business operations)

Look at the Order of Liquidity
Features of the Balance Sheet

The liabilities are generally listed in the
order in which they are normally paid

The two final totals are listed on the
same line on the balance sheet and are
underlined with a double line
Accounts Receivable
Customers of the business will often buy
goods or services with the understanding
that they will be paid for in the future
 These debts owed represent a dollar value
to the business, so the business has a right
to include them among the assets on the
balance sheet
 Each of these customers that owes money
to the business is one of its debtors

Accounts Payable
A business often purchases goods and
services from its suppliers with the
understanding that payment will be
made later
 These debts to suppliers represent an
obligation of the business, so the
business must include them among its
liabilities
 Each of the suppliers owed money by
the business is one of its creditors
