Accounting and Finance Foundations

(Chris Devlin) #1

Unit 7


Accounting and Finance Foundations Unit 7: Financial Statements 565

Financial Statements
Chapter 18

Student Guide


18.3.1 Student Handout: Balance Sheet Key Terms


Assets

Current Assets - assets that can be converted to cash within 1 year

Petty Cash: Currency held in the petty cash fund on business premises
Cash in Bank: Current balance in business bank accounts
Accounts Receivable: Amounts that customers owe the business for merchandise or services received
but not yet paid for them.
Notes Receivable: Promissory notes and other amounts owed to the business; money advanced or
loaned to others by the business
Merchandise Inventory: Value of merchandise on hand to sell to customers
Office, Store Supplies: Value of supplies on hand such as stationary, pens, file folders, labels

Plant and Equipment - (fixed assets) assets that are used for more than 1 year
Business Equipment: Value of equipment used by the business (tools, display cases, machinery)
Office Furniture & Equipment: Value of office furniture (desks, chairs, filing cabinets) and equipment
(computers, copiers, printers)
Buildings: Value of the buildings owned by the business
Land: Value of the property and grounds on which the buildings stand and other land owned by
the business

Liabilities

Current Liabilities - liabilities expected to be paid within 1 year
Accounts Payable - Money owed for merchandise, services or materials the business has received but
has not paid for yet.
Notes Payable - Promissory notes that the business owes to a bank or formal lender
Wages Payable - Salaries that a business owes to its employees

Long-term Liabilities - liabilities that are not expected to be paid within 1 year
Mortgage Payable - The debt owed on the buildings and (and that the business owns)

Shareholder’s Equity

As you recall, investments made by the owner of a sole proprietorship are recorded in the Owner’s Capital
account. If a business is organized as a corporation, the Owner’s Capital account is replaced by an account
named Common Stock. Common stock represents the money paid by the stockholders for their shares of
stock purchased.

Remember that the annual profit was added to the Owner’s Capital account at the end of the year. In a
corporation all of the profits retained in the business are shown in an account called Retained Earnings.
These two accounts, Common Stock and Retained Earnings, make up the Shareholder’s Equity section of
the corporate balance sheet.

Student Handout: Balance Sheet Key Terms

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