Corporate Fin Mgt NDLM.PDF

? Financial Expenses

? Maintenance and depreciation

14.2. The credit balance of Profit and Loss Account shows the net profit. The

debit balance on the Profit and Loss Account shows the net loss.

15. Balance Sheet

15.1. The Balance Sheet shows the following:

? How net profit influenced capital

? What is the capital made up of.

15.2. The Balance Sheet is a statement of financial position for the prescribed

accounting period in terms of Assets and Liabilities. The right hand side

shows the Asset side and left hand side shows the Liabilities side.

15.3. The assets and liabilities will be given value in terms of money.

• The assets will show how money was used.


• The liabilities will show where the money had come from.

ASSETS

=

Liabilities to creditors and

shareholders

15.4. The Balance Sheet to be supported by Profit and Loss Account sources and

uses of funds statement, notes to the financial statements and the auditor

certificate.

15.5. What the business owns are assets and what it owes are liabilities. The assets

are of two groups, namely:

ο Fixed Assets

ο Current Assets

Fixed Assets: - Are meant for long term use

Current Assets :- Are ready to be converted into cash during the operating cycle of the
business e.g., accounts receivable, inventories, marketable securities. Cash is a first
current asset. The period between buying the raw materials and selling the finished
products is the operating cycle, which will be less than one year.