Financial Position

Balance sheet

Balance sheet

a statement of the assets, liabilities, and capital of a business or other organization at a particular point in time, detailing the balance of income and expenditure over the preceding period.

Assets

items of value owned by a business or a person. (House, car, cash)

Liabilities

the debts of a person or business (mortgage payments, bank loan) `

Owners equity

the owners claim against the assets of a company

Balance sheet equation

Assets = Liabilities + Owner's Equity

Debtors

people who owe money to the business

Another term for accounts receivable

Debtors

Is a debtor of a company an asset or a liability

asset

creditors

debts are owed to, they have a claim against the business

another term for accounts payable

creditors

is a creditor of a company an asset or a liability

liability

three lines heading of a balance sheet

who

what

where

the purpose of accounting

to provide information for decision making

liquidity order

the order in which the assets listed on the balance sheet would be converted into cash. long lasting assets are listed in order of useful life with the longest lasting listed first.

business entity principle

each business must be considered a separate entity, and the financial data for each business must be kept separate from the owners personal financial data.

cost principle

means that the assets at recorded at their actual cost to the business

Maturity date rule

the assets are recorded at their actual cost to the business. liabilities are listed according to the date they are due to be paid