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The Balance Statement shows the Assets and the Liabilities in the company.
The Liabilities can be divided into two different types:
- Money that the company has accumulated during the years
- Money that the company has borrowed or owes to creditors
At least at the end of every financial year a company will calculate the two
types of liabilities. Together they make the sum of money which is available to
the company at the end of a financial year. For instance at 31st December 2010.
Accumulated funds
The part of the liabilities which is the money that the company owns is
usually registered on the following accounts:
Owner´s Equity
The Owner´s Equity is the company´s accumulated funds. It consists of money
which was given to the company when it started. Probably the money came from the
owner himself and/or his investors.
Money which the company itself has generated from its activities prior to the
financial period will be registered here. For instance the profit generated in
the company in 2010 will be transferred to Owner´s Equity.
If one year you lose money the amount will be deducted from Owner´s Equity.
Donations
If the company is a development project or a socially oriented organisation it
will now and then be granted funds. These donations will be registered on the
Donation account.
Creditors
The money that the company owes to creditors could be registered on the
following accounts:
- Bank loans – money borrowed from a financial institution
- Suppliers – goods received but not paid for
- Sales tax – tax owed to the government
- Staff tax – tax owed to the government
- Other Creditors – others the company owes money
Liabilities = Assets
When you add all the above mentioned Liabilities you get the total figure.
The figure must be the same as the total figure for the Assets.
This is due the accountancy system: The Double Entry System.
Example from a Balance Statement:
|
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 |
- Go to next
business issue: Contribution Margin and Gross Profit
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Copyright © 2009 Dynamic Business Plan 05-02-2012
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