5TOBM-MDFL6-Balance Sheet

Are resources of value a business owns or are owed to it.

• Liabilities

• Assets

• Equity

Firm’s legal debts or what it owes to other firms, institutions, or individuals.

• Liabilities

• Assets

• Equity

Total value of assets less total value of liabilities. It represents the capital originally invested in the business (share capital) or the retained earnings / profits (reserves).

• Liabilities

• Assets

• Equity

Long-term assets that last in a business for more than 12 months. Tangible examples that are physical in nature include buildings, equipment, vehicles, and machinery.

• Fixed assets

• Current assets

Short-term assets that last in a business for up to 12 months. They include cash, debtors, and stock.

• Fixed assets

• Current assets

They are long-term debts or borrowings payable after 12 months by the business. They include long-term bank loans and mortgages.

• Long-term liabilities

• Current liabilities

They are short-term debts that are payable by the business within 12 months. These includes creditors (unpaid suppliers who sold goods on credit to the firm), a bank overdraft, and tax (money owed to the government such as corporation tax).

• Long-term liabilities

• Current liabilities

Refers to the original capital invested into the business through shares bought by shareholders. It is a permanent source of capital. Does not include the daily buying and selling of shares in a stock exchange or the current market value of shares.

• Retained profit

• Share capital

What is the formula of working capital?

• Total current assets – Total current liabilities

• (Fixed assets + Current assets) – Current liabilities

• (Total assets less current liabilities) – long-term liabilities

• Share capital + Retained profit

What is the formula of total assets less current liabilities?

• Total current assets – Total current liabilities

• (Fixed assets + Current assets) – Current liabilities

• (Total assets less current liabilities) – long-term liabilities

• Share capital + Retained profit