Balance Sheet - The Basics

A revision resource for the introductory theory to Balance Sheets.

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What is an asset?
Assets are the resources used by a business
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What is a Fixed Asset?
A Fixed asset is an asset that has a life span of more than one year, e.g. machinery.
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Can you provide examples of Fixed Assets?
Tangible, e.g. property, machinery; Intangible, e.g. goodwill, brand name; Financial, e.g. investment, shares
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What is a Current Asset?
Current assets are assets that will be changed into cash with one year, e.g. stock.
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Can you provide examples of Current Assets?
Stock, work-in-progress, cash in hand, cash in bank, debtors.
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What is a Current Liability?
Current Liabilities are the short-term debts of the firm. They are all the liabilities that the business must repay within one year. These are recorded in the first part of a Balance Sheet.
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Can you provide examples of Current Liabilities?
Trade creditors, overdrafts and Corporation Tax
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How is the Working Capital Figure (a.k.a. Net Current Assets) calculated?
Current Assets - Current Liabilities = Working Capital.
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How is the Net Asset figure calculated?
Fixed Assets - Working Capital = Net Assets.
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What are long-term liabilities?
Long-term Liabilities are the debts of the business that will be repaid in a time period longer than a year. These are recorded in the second part of a Balance Sheet.
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What is the most common long-term liability?
The most common long-term liability is a loan.
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What is Capital?
Capital is the money put into/invested in the business by the owners.
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How is the Capital Employed figure calculated, in a simple Balance Sheet?
Capital + Net Profit + Long-term Liabilities = Capital Employed.
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Why is it called a Balance Sheet?
It is called a Balance Sheet because the Net Assets of the business must equal the Capital Employed by the business.
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Other cards in this set

Card 2

Front

What is a Fixed Asset?

Back

A Fixed asset is an asset that has a life span of more than one year, e.g. machinery.

Card 3

Front

Can you provide examples of Fixed Assets?

Back

Preview of the front of card 3

Card 4

Front

What is a Current Asset?

Back

Preview of the front of card 4

Card 5

Front

Can you provide examples of Current Assets?

Back

Preview of the front of card 5
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davidsalter

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This resource is good for learning what the headings on the balance sheet are as well as examples for each. Can be used for revision and testing knowledge.

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