Class notes Financial Accounting

Balance Sheet = a statement at one specific moment in time (not a period)

Left Side (debit) → Where is money invested in (assets)
Right Side (credit) → How did they pay for all these assets (liabilities (bank) & equity
(shareholders and own money))


Assets and liabilities are in balance!
Closing balance sheet 2019 (31-12-2019) is the opening balance sheet for 2020 (01-01)
Current assets = conversion within 12 months Current (short term) liabilities < 12
(more liquid) months
 cash; bank  accounts payable
 marketable securities  sales tax payable
 accounts receivable (money still needs  accrued expenses
to be received from customer)  current portion of long term debt
 inventories
 prepaid expenses

Non current assets = fixed assets (tangible) Long term liabilities
 investments  mortgage
 property and equipment  excluding current portion
 land
 building
 china, glassware
 accumulated depreciation

Other assets (intangible = trademarks)  Equity
 goodwill o proprietorship (1 person
company)
 capital
 withdrawals
o corporation
 common stock
issued
 additional paid-in
capital
 retained earnings


Current portion of long term debt
 Shows on your balance sheet what part of the debt/loan has to be repaid within the
next 12 months
 This is valuable information for stakeholders: i.e. investors, banks, employees etc.
 It will help to assess the level of liquidity in the company

Liquidity = the ability of a company to pay (with current assets) its short term obligations
(=current liabilities)

Solvency = the ability of a company to pay all its obligations (comparing assets with all
liabilities)

A loan is split into 2 parts:
1. Part that needs to be paid within 1 year = current portion
2. Part that needs to be paid after 1 year = long term portion