7 finance_balance_sheet

7 finance_balance_sheet - tutor2u GCSE Business Studies...

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Unformatted text preview: tutor2u GCSE Business Studies Balance Sheet Balance sheets provide a snap shot of the assets and liabilities of a business at a point of time. It shows what the business owns, is owed and owes: ,, ,, ,, ,, Owns assets such as buildings, stock and cash. Is owed money from debtors. Owes money to creditors and the bank. Owes to the investors and owners of the business (they own the profit). A typical balance sheet would look like this: st Balance sheet for XYZ plc as at 31 March 2003 '000 Notes Fixed assets Current assets Stock Debtors Cash Total current assets Current liabilities Net Current Assets Net assets employed Financed by: Long term liabilities Share capital Profit and loss reserves Capital employed 700 e.g. loans from banks 1,000 Amounts invested by shareholders 400 The profit accumulated that has been retained by the business 300 250 150 700 Stock + debtors + cash (400) 300 Current assets current liabilities also known as working capital 1,800 Likely to find subtotals for buildings, equipment and vehicles 2,100 Fixed assets + net current assets 2,100 Long term liabilities + share capital + profit and loss reserves Note that net assets employed = capital employed. This is always the case, because the capital employed is the amount of longterm money put into the business and the net assets employed how it is used. Fixed assets Fixed assets are: ,, Assets that provide a benefit for the business in the longterm (normally for at least a year), e.g. buildings and machinery tutor2u GCSE Business Studies ,, Assets that the business intends to keep Note that fixed assets are depreciated over their useful life Current assets Current assets are assets that will be used up or sold in the next year + the cash balances kept in the business. The main categories are: ,, Stocks finished goods, work in progress and raw materials (note: you may also see stocks called "inventories"). Debtors people who owe the business money (customers who owe money are known as "trade debtors"). Cash in the bank and in the cash box. ,, ,, Current liabilities Current liabilities are what the business owes in the short run. The main categories are: ,, ,, Creditors money owed by the business in the short term (suppliers who are owed money by the business are known as "trade creditors"). Bank overdraft amounts due within the next 12 months. The total of current assets minus current liabilities is known as working capital. This is amount of money available for the day to day running of the business. A negative figure can be a problem for some businesses that may need to pay for outstanding debts, but do not have enough spare cash to do so. ,, ,, ,, Longterm liabilities are the monies the business has borrowed for a period of more than a year mainly bank loans. Share capital is the money invested in the business by the owners. Profit and loss reserves are the profits due to the owners that have not already been paid out in dividends. This money is not necessarily held in cash (see the current assets), but may have been used to buy more stock or fixed assets. Shareholder funds are the share capital and reserves added together. Capital is the amount of longterm money put into the business to buy assets. Main forms of capital: owner's money (share capital) and long term bank loans. ,, ,, Key Links for GCSE Business Studies http://www.tutor2u.net/ Discussion Board for GCSE Business Studies Other GCSE Business Studies Revision Notes and Resources from tutor2u Tutor2u GCSE Business Online Store ...
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