The Balance Statement shows the Assets and the Liabilities in the company.
- The Liabilities indicate the sources of money which have been available to
the company. You could also say: "Where did the money come from"
- The Assets show how the money which has been made available to the company
was placed. You could also say: "What did we do with the money"
The Balance Statement only tells how the company stands on one particular
day, for instance the 31st December or 30th April .
The Balance Statement is usually made by the accountant but it is in your
interest to understand it.
The first Balance Statement
Imagine that you start your business on the 1st January. This is also the
day your Balance Statement starts.
- On the 1st January you use 10.000 of your own personal money to put into
your new company. On the balance sheet it looks like this:
|
Assets |
Liability |
|
Cash |
10.000 |
Owners Equity |
10.000 |
|
Total |
10.000 |
Total |
10.000 |
On the 2nd January you buy a powerful graphic Mac computer at 3.000. You use
the money from the cash box to buy it. The balance sheet then looks like this:
|
Assets |
Liability |
|
Cash |
7.000 |
Owners Equity |
10.000 |
|
Equipment |
3.000 |
.
|
.
|
|
Total |
10.000 |
Total |
10.000 |
- On 3rd January you are allowed to borrow 12.000 from the Bank. You use
8.000 of the loan to buy goods for your Art Shop.
You put 4.000 on a Bank account for later use. The balance sheet then looks
like this:
|
Assets |
Liability |
|
Cash |
7.000 |
Owners Equity |
10.000 |
|
Bank account |
4.000 |
Loan from Bank |
12.000 |
|
Equipment |
3.000 |
.
|
.
|
|
Stock |
8.000 |
.
|
.
|
|
Total |
22.000 |
Total |
22.000 |
The transactions you will be doing throughout the year that effects the
balance accounts will be registered like the ones shown above.
Notice that Assets always equals Liabilities.
- Go to next
business issue: The Assets
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| victoria bhila, RSA |
29-01-2011 |
financial statement
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Copyright © 2009 Dynamic Business Plan 21-05-2012
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