Balance Sheet (SOFP)

What is step 1

headings

all headings (7)

1. non-current assets

2. current assets

3. total assets

4. equity

5. non-current liabilities

6. current liabilities

7. total equity and liabilities

what goes under non-current assets (2)

• property, plant and equipment

• intangible assets

what goes under current assets (4)

1. inventories

2. trade receivables

3. prepayments

4. cash

what goes under equity (3)

1. share capital

2. share premium

3. retained earnings

what goes under non-current liabilities (1)

long term borrowings

what goes under current liabilities (3)

1. trade payables

2. accruals

3. short-term borrowing

what is step 2:

write out value of all assets and liabilities on trial balance

what is step 3:

look at all additional information - update each value accordingly

12 scenarios of additional information

1. Depreciation

2. Asset bought and not recorded

3. asset sold and not recorded

4. inventory adjustments

5. accrued expenses

6. prepaid expenses

7. interest payable/finance costs

8. tax payable

9. dividends paid or proposed

10. share issues

11. re-evaluation of non-current assets

12. loan movements

how do you calculate depreciation? (straight line)

cost-residual value/useful life

how do you calculate depreciation? (reducing balance method)

% x value at start of year

what effect does depreciation have on SOFP

reduce non-current assets value

what effect does purchase of non-current asset have on SOFP (2)

1. increase PPE value

2. decrease cash (debit) or increase payables/loan (credit)

remember to account for depreciation of asset

what effect does disposal of non-current asset have on SOFP (2)

1. remove the asset’s net book value from PPE

2. increase cash by proceeds

remember to account for depreciation of asset

what effect does accrued expenses have on SOFP

add accrual to current liabilities

what effect does prepaid expenses have to SOFP

add prepayment under current assets, if its different year do amount paid x months left/12

what affect does interest payable have on SOFP

add under current liabilities

what affect does tax payable have on SOFP

add under current liabilities

what affect does dividends paid have on SOFP

reduce cash

what affect does share issue have on SOFP

increase share capital and cash

what affect does revaluation of asset have on SOFP

• adjust PPE to revalued amount

• add revaluation reserve under equity

what affect does new loan have on SOFP

increase loan (NCL or CL depends on term), increase cash

how do we calculate trade receivables

trial balance
less: bad debts
less: allowance for bad debts

how do we calculate prepayments

work out portion that is after year/end, show closing prepayment

what affect do assets have on cash

assets bought adds

assets sold subtracts

what goes under accruals (under current liabilities)

any bill that is not yet received/estimated/owed

how do we split borrowing

what is due in 12 months = CL, what is due after = NCL

what is equity?

capital + retained profit + profit from income statement