BALANCE-SHEET

Balance Sheet

Review of Expenses:

  • Salaries Expense: P14,029.00 - Represents the total costs incurred for employee compensation during the accounting period.

  • Supplies Expense: P5,530.00 - Reflects the costs for consumable supplies used in operations within the period.

  • Advertising Expense: P5,450.00 - Costs incurred for marketing and promoting the business to attract customers.

  • Rental Expense: P5,023.00 - The total amount spent on leasing properties or equipment necessary for business operations.

  • Depreciation Expense: P1,500.00 - The allocated cost of tangible assets over their useful life, indicating wear and tear.

  • Sales: P85,262.00 - Total revenue generated from goods or services sold to customers within the accounting period.

  • Fuel Expense: P2,187.00 - Costs related to fuel necessary for business operations, especially for service-oriented businesses.

Total Expenses and Net Income/Loss

Objectives:

  1. Complete the accounting cycle of a merchandising business - Ensure all financial transactions are accurately recorded, classified, summarized, and reported when preparing financial statements.

  2. Define and prepare the balance sheet - Understand the framework for constructing a balance sheet and ensure compliance with accounting standards and regulations.

  3. Ensure accurate and timely financial statements - Maintain the integrity of financial reporting to stakeholders, including investors and regulatory bodies.

Guide Questions:

  • What is a Balance Sheet? - A crucial financial report that provides a snapshot of a company's financial position at a specific point in time.

  • What is the composition of a Balance Sheet? - Typically divided into three main sections: assets (resources owned), liabilities (obligations owed), and equity (owner's claim on assets).

  • Steps in preparing a Balance Sheet - Gather financial data, categorize assets, liabilities, and equity, and ensure that total assets equal the sum of total liabilities and equity.

  • Importance of knowing a company’s financial position - Essential for stakeholders to make informed decisions regarding financial performance, investment opportunities, and risk assessment.

Definition of Balance Sheet:

  • A financial statement showing the "book value" by subtracting liabilities and equity from assets. Provides an analysis of a company’s performance over time to help stakeholders assess the firm's stability and solvency.

Details of Balance Sheet:

  • The balance sheet presents a financial position by listing assets (current and non-current), liabilities (current and non-current), and equity on a specific date. It is also known as a statement of financial position.

Presentation of Balance Sheet:

  • Assets are listed first, followed by liabilities and then equity. It is vital that the total assets must equal total liabilities and equity to maintain balance and accuracy in financial reporting.

Format of the Balance Sheet:

  • Typically, the balance sheet follows a structured format, categorized under assets, liabilities, and equity sections.

Example:


GRAY ELECTRONICS REPAIR SERVICESStatement of Financial Position as of December 31, 2020

Assets:

  • Cash: P7,480.00 - Liquid assets available for immediate use.

  • Accounts Receivable: P3,700.00 - Money owed to the business from customers for services rendered.

    • Less: Allowance for Doubtful Accounts: (P100.00) - Estimation of accounts receivable that may not be collected.

  • Service Supplies: P600.00 - Inventory of supplies available for service delivery.

  • Furniture and Fixture: P3,000.00 - The cost of furniture used in the business that contributes to business operations.

  • Service Equipment: P16,000.00 - Total cost of equipment necessary for service provision.

    • Less: Accumulated Depreciation: (P4,000.00) - The total depreciation charged on the service equipment to date.

Total Assets: P26,680.00

Liabilities:

  • Accounts Payable: P9,000.00 - Obligations to pay suppliers for goods/services received.

  • Utilities Payable: P1,800.00 - Amount owed for utilities consumed but not yet paid.

  • Loans Payable: P12,000.00 - Outstanding loan amounts that need to be repaid.

Owner's Equity:

  • Mr. Gray, Capital: P3,880.00 - Owner’s investment in the business.

Total Liabilities and Capital: P26,680.00

Account Transactions:

  • Cash (Debit): P181,000.00 - Total cash inflow recorded.

  • Credit Transactions:

    • Accounts Receivables: P30,000.00

    • Office Equipment: P25,000.00

    • Accounts Payable: P3,800.00 - Increase in liabilities.

    • Matapang Capital: P200,000.00

    • Service Revenue/Income: P40,000.00 - Revenue generated from services provided.

    • Supplies Expense: P1,800.00

    • Salaries Expense: P4,000.00

    • Depreciation Expense: P200.00

    • Accumulated Depreciation - Office Supplies: P2,000.00

Total: P244,000.00

Reflect:

  • Positive thoughts are assets. - Emphasizing the importance of a constructive mindset towards achieving goals.

  • Negative thoughts are liabilities. - Understanding that detrimental thoughts can impede progress.

  • Self-worth is a reflection of current self. - Recognizing the need for self-evaluation and personal growth.

Exit Ticket:

  • Reflect on the most important lesson learned today to consolidate understanding and application of accounting principles.

Activity 2:

Preparation of Balance Sheet - Trainees will practice preparing a balance sheet to reinforce learning.

Assignment:

  • Advance reading on preparation of closing entries to prepare for upcoming practical applications and assessments.

  • Reflection on learned material in a yellow pad paper to deepen comprehension and retention.