3. Balance Sheet II

What are current assets and examples

Short-term assets that are expected to be converted into economic benefit usually within a year

e.g. cash, inventory, trade receivables, prepaid expenses

What are non-current assets

Long-term resources a business owns and uses in its operations usually for over a year rather than converting them into cash

What are the types of non-current assets and examples

Tangible Assets - Non-Current assets with physical substances
e.g. land, building, factory, equipment, car, furniture, computer

Intangible Assets - Non-Current Assets without physical substances
e.g. patent, copyright, trademark, goodwill

What are current liabilities

A company's short-term financial obligations that are due and payable usually within one year

What are non-current liabilities

Long-term financial debts or obligations that a company does not need to pay off within the next 12 months

Examples of current and non-current liabilities

Not a set list for each as the list is determined on the time frame

e.g. accrued expenses, borrowing (loan), trade payables, customer advance, cash overdraft

How do we calculate share capital

Par value x Number of shares

Par value ≠ Actual Share Price

How do we record the selling of shares at par value on the balance sheet

If shares are sold for par value, increase in equity (share capital) and increase in assets (cash)

How do we record the selling of shares above par value on the balance sheet

If shares are sold for above par value, increase in equity (share capital and share premium) and increase in assets (cash)

How do we record the selling of shares below par value on the balance sheet

If shares are sold for below value, increase in equity (share capital) but also decrease in equity (share discount) and increase in assets (cash)

How do we record dividends paid now on the balance sheet

Decrease in equity (retained profit) and decrease in assets (cash)

How do we record dividends that are declared on the balance sheet

There is a gap between the declared date and the payment date

Initially, decrease in equity (retained profit) and increase in liabilities (dividend payable)

Once paid, decrease in liabilities (dividend payable) and decrease in assets (cash)

How should the balance sheet be presented

Accounting Standards (e.g. IFRS) do not mandate any single format

Could be any of the formats in the picture

What are the accounting principles

Legal Entity - We record business transactions from the perspective of the company

Dual Aspect - The accounting equation always has to balance

Historic Cost - A company needs to record its assets, liabilities and equity at their original purchase price

Going Concern - A business will continue operating for the foreseeable future, usually at least 12 months

Prudence (Conservatism) -