5 min read · Aug 17, 2023
Balance Sheet Assignment Help
Arguably, the balance sheet is the simplest and most basic financial statement a student can ever come across. It has only two sections (the debit and credit sides) that it uses to record the activities of a business. As simple as it is, the balance sheet is a very important document in the daily operations of any business. Just the fact that it details the movement in and out of assets and liabilities is enough to reiterate this fact. Any business is predicated on assets and liabilities.
As basic as it sounds, the balance sheet can be confusing at times. In fact, many students spend a lot of time trying to make the two sides of this statement balance to no avail. The truth is, the balance sheet is not as simple as it appears to be. Without the proper understanding of the concepts of assets and liabilities, there is absolutely no way you can handle a question about balance sheets. It is common to find students at crossroads in the determination of whether to classify an item as an asset or liability. Expert help can go a long way to help you navigate all the intricacies of a balance sheet.
This is a statement of the assets, liabilities, and capital of a business or any other organization at any particular period of time. This financial statement helps in computing rates of return for investors and evaluating a company’s capital structure. The relationship between the items in the balance sheet is expressed by the equation below:
Assets = Liabilities + Equity
To effectively illustrate the net worth of a business, the balance sheet employs a number of items. These are the basic building blocks of the balance sheet. Without any of the following, the balance would not make sense.
These are simply the economic resources of a business. They include everything a business owns, from cash to equipment to intellectual property. Assets are the ones used to generate income. They are all the business can count on that have future value. Assets are divided into 2 categories namely:
1. Fixed assets — these are the constructed or purchased assets that are used to earn profit for a long period of time and not just one financial year. They include buildings, machinery, land, plant, and furniture. They cannot be easily converted into cash.
2. Current assets — unlike fixed assets, current assets can easily be converted to liquid cash to take care of liabilities. Examples of current assets are cash at banks, stock, and sundry debtors.
In the balance sheet, there is an order in which the bassets appear. The following is the order:
· Cash and cash equivalents — these are the most liquid assets. Hard currency, treasury bills, and short-term certificates of deposit are good examples.
· Marketable securities — they include equity and debt securities which have a ready market.
· Accounts receivables — an example is the money customers owe the business.
· Inventory — these are the goods available for sale. They are usually valued at a price lower than that of the market.
· Prepaid expenses — these assets represent the value already paid by the business in the form of insurance, advertising, rent, or contracts.
Liabilities are the obligations a business has due to past transactions or events; the settlement of which is expected to see an outflow of cash from the business. These obligations are owed to outside parties, ranging from bills owed to suppliers to interest on bonds it has issued to creditors to rent, utilities, and salaries. There are two types of liabilities
1. Current liabilities — these are the liabilities expected to be settled by the end of the current financial year. They include taxes, accounts payables, and partial payments on long-term loans.
2. Long-term liabilities — these are liabilities that can only be liquated in more than one financial year. They include long-term loans and bonds, mortgages, and pension obligations.
Note that while assets are represented on the right-hand side (debit side) of the balance sheet, the liabilities appear on the left-hand side (credit side) of the balance sheet.
This is the money attributable to shareholders. It is also referred to as the net assets. It is equivalent to the total assets of the business minus all the liabilities. Retained earnings are the net earnings a company either reinvests in the business or uses to pay off debt; the rest is distributed to shareholders in the form of dividends.
· Establishing the financial position
· Evaluating the business working capital
· To evaluate if the business has liquidity
· To evaluate if the business has solvency
· To comply with tax regulations and other laws
· To evaluate the pace at which the assets can be converted to capital
· To evaluate the amount of profit retained in the business
· Helps in calculating the financial ratios
· Help the management make decisions
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