managing-budgets

Information about the organizations current ability

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Unformatted text preview: that the accounting team has already entered into the financial system. If a large liability were to be incurred tomorrow, the financial picture could shift significantly. The information shows how the organization is positioned to keep going with the day to day business operations. For example, the assets listed give you some idea of what you have available right now to keep trying to generate new assets (new revenue). Download free ebooks at bookboon.com 25 Balance Sheet Managing Budgets The Balance Sheet also shows what claim the owners have against the business’ assets. Of course, this is conditional on the other liabilities being satisfied. ABC Enterprises Balance Sheet As of November 30, 20XX Assets Liabilities Cash 8,500 Bank Loan 5,000 Inventory 14,000 Accounts Payable 1,200 Accounts Receivable 2,200 Total Liabilities Equipment 4,600 6,200 Equity Paid in Capital 15,000 Retained Earnings 8,100 Total Equity Total Assets 29,300 23,100 Total Liabilities & Equity 29,300 Figure 4: Sample Balance Sheet Download free ebooks at bookboon.com 26 Balance Sheet Managing Budgets 4.3 What the Balance Sheet Doesn’t Tell You Of course, there are several parts of the financial picture that are not included in the Balance Sheet. For example, the Balance Sheet does not tell you: How any profits were made. For that information, you’d need to look at the Income Statement. Which assets creditors have claims against. For example, if you are financing equipment, your creditor has a claim against that equipment until it is paid. What kind of capital investment was made. You might assume that we’re talking about cash, but instead, the owner or owners might have purchased a building that is not necessarily convertible back to cash (at least not immediately). Please click the advert What value the business would have on the market place. For example, if the owner purchased that building for $50,000 10 years ago, it might be worth twice that now. Or, it could even be worth less if the real estate market has...
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This note was uploaded on 06/07/2013 for the course BA 201 taught by Professor Cuongvu during the Fall '13 term at RMIT Vietnam.

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