Balance sheet liabilities

An income statement such as the one shown in Table 9-16 is used to obtain the profit or loss for a given period. The debit and credit balances of all the accounts that do not represent expenditure or income for a given accounting period are entered as assets and liabilities in a balance sheet such as that shown in Table 9-17. 

There is no rigid format for either the income statement or the balance sheet. Tables 9-16 and 9-17 show common layouts for the income statement and balance sheet respectively, but these are not the only forms. For example, vertical balance sheets, with the assets listed above the liabilities and equity, are also popular. 

Similarly, the distinction between current and long-term liabihties is also not clear-cut. Current liabilities include accounts payable (money owed to creditors), taxes payable, dividends payable, etc., if due within a year. Long-term liabihties include deferred income taxes, bonds, notes, etc., that do not have to be paid within a year. The owners equity includes the par, or face, value of the capital received from stockholders and any retained earnings. The balance sheet shows only the nominal value and not the current or real value of this capital. 

Total assets 100,000 Total liabilities and stockholders equity 100,000 Y Company balance sheet... 

For corporations the same reasoning applies. To offer the prime interest rate the lender must be sure he can get his capital back plus interest. This means that the borrower s total assets must be considerably greater than the current liabilities and debts. Consider the simplified balance sheet given in Table 10-13. By current assets is meant cash and everything involved in working capital-feedstocks, unsold product, plus all the product that has been shipped but for which no payment has... 

If Ihe assets for the company whose balance sheet is given in Table 10-13 can only be sold at half their listed value, then after all the current liabilities and bonds have been paid off, there would be nothing left for the stockholders. In fact, some of the bondholders might not be totally reimbursed, since it would cost something to liquidate the company s assets. This company could not get a loan at prime interest rates. It would have a better chance of getting a good interest rate if its balance sheet resembled that given in Table 10-14. 

Figure B.8 illustrates the balance sheet. A balance sheet is a snapshot of the assets and liabilities at one point in time. It tells nothing about the transactions and adjustments that led to the numbers presented in the statement. A comparison of balance sheets over time can help indicate earnings.

The reconciliation between the cash flow statement and the income and expense statement is as follows. Start with the 40,000 from the last line in the cash flow statement, subtract 20,000 for the depreciation expense, and add back the 30,000 mortgage loan principal payment (not an allowed expense). The result is the net after-tax earnings. Figure B.ll is a set of statements from a small oil company. The statement of operations lists revenue and expenses, whereas the balance sheet lists various assets, liabilities, and stockholders equity ( net worth ). So-called capital items such as buildings, equipment, oil and gas property, and various intangibles are assets. Operating costs are deductions from revenues for operations not including expenditures for capital items. 

C. Balance sheet current and fixed assets, current and long-term liabilities, net worth... 

Balance Sheet The balance sheet represents an accounting view of the financial status of a company on a particular date. Table 9-3 is an example of a balance sheet for a company. The date frequently used by corporations is December 31 of any given year, although some companies are now using June 30 or September 30 as the closing date. It is as if the company s operation were frozen in time on that date. The term consolidated means that all the balance sheet and income statement data include information from the parent as well as subsidiary operations. The balance sheet consists of two parts assets are the items that the company owns, and liabilities and stockholders equity are what the... 

Balance sheet This is an accounting, historical tabulation of assets, liabilities, and stockholders equity for a company. The assets must equal the liabilities plus the stockholders equity. 

On a balance sheet, the sum of the total liabilities and the stockholders equity must equal the total assets, hence the term balance sheet. Comparing balance sheets for successive years, one can follow changes in various items that will indicate how well the company manages its assets and meets its obligations. 

The accounting definition of woridng capital is total current assets minus total current liabilities. This information can be found from the balance sheet. Current assets consist chiefly of cash, marketable securities, accounts receivable, and inventories current liabilities include accounts payable, short-term debts, and the part of the long-term debt currently due. The accounting definition is in terms of the entire company. 

The operational liabilities and assets of the company should include all contractual, legal and financial commitments both on and off the balance sheet such as ... 

Table 15-2 shows the balance sheet for Whole Health Partners Pharmacies (WHP). The balance sheet provides a snapshot of an organizations assets, liabilities, and shareholder equity at any particular point in time. While organizations generally prepare a balance sheet at the end of a fiscal year, they may prepare this statement at any point in time (e.g., at the end of a month or a quarter). As discussed in the introduction, the balance sheets total assets must equal the total liabilities plus shareholders equity at all times. 

As of November 1, year 0, WHP had not yet started operations. However, WHP had acquired all the assets it needed to begin operations. When we examine WHP s balance sheet after 1 year of operations (year 1), we notice changes in assets, liabilities, and shareholders equity. WHP s goal, like that of most businesses, is to increase its assets through profitable operations throughout the fiscal year. Assuming that WHP is able to keep its liabilities unchanged, an increase in assets would result in an increase in shareholders equity, and that will make for one happy pharmacist owner ... 

The balance sheet in Table 15-2 shows the values of assets, liabilities, and shareholders equity, but because it is only a snapshot, it does not reveal much about what caused these values to change over the course of the year. The balance sheet also does not tell us how... 

The balance sheet, as its name implies, shows the equivalence between the assets of the company (i.e. what it owns), and the liabilities (i.e. what it owes), all calculated on the day of the balance. The total assets must equal the total liabilities. 

Modem balance sheets often use the general term liabilities in place of equities. Current liabilities are grouped together and include all liabilities such as accounts payable, debts, and tax accruals due within 12 months of the balance-sheet date. The net working capital of a company can be obtained directly from the balance sheet as the difference between current assets and current liabilities. Other liabilities, such as long-term debts, deferred credits, and reserves are listed under separate headings. Proprietorship, stockholders equity, or capital stock and surplus complete the record on the equity (or liability) side of the balance sheet. 

Consolidated balance sheets are ordinarily presented with assets listed on the left and liabilities, including proprietorship, listed on the right. As indicated in Eq. (1), the total value of the assets must equal the total value of the equities. A typical balance sheet of this type is presented in Fig. 5-2. 

Balance sheets and income statements are summarizing records showing the important relationships among assets, liabilities, income, and costs at one particular time or over a period of time. Some method must be used for recording the day-to-day events. This is accomplished by the use of journals and ledgers. 

Assets are things of value that the business owns. Liabilities are amounts that the firm owes to others such as suppliers. For example, the amount owed on the purchase of a computer is a liability. Finally, owner s equity represents claims of fhe owner, wherein claims can increase by personal investments from oufside the business and by earning revenue as the result of conducting business. Equity that is accumulated from a successful business and kept by the firm is included in the retained earnings account. Table 9.5 shows the balance sheet for Harris Pharmacy. 

Assets Harris Pharmacy Balance Sheet May 31, 20- Liabilities and Owner s Equity ... 

In a balance sheet, total assets and total liabilities should be used as denominators to determine the percentage of specific assets, liabilities, and owner s equity, respectively. All financial statement users, including shareholders, will exhibit concern because this drop in gross profit may make the firm report a net loss on the current income statement. Table 9.9 illustrates a sample of vertical analysis for a balance sheet. 

Note (1) The vertical analysis of the balance sheet reflects any account selected as the numerator and the amount of total assets as the base or denominator (e.g., cash account 32,000/ 186,330). (2) Each liability or owner equity account is divided by the total of liabilities and owner s equity. 

The balance sheet is a snapshot of the financial condition of the company. It lists all the assets owned by the company and all the liabilities or amounts owed by the company. The difference between assets and liabilities is the stockholder s equity, i.e., notionally the amount of money the stockholders would have available to share out if they decided to liquidate the company. 

Section 6.2.3 is called Total Cost Assessment Looking at All the Costs Involved with a Decision. Traditional decision-making typically focuses on direct and indirect costs that appear on the balance sheet. The TCA model defines three additional cost types, contingent liabilities and internal and external intangibles. A methodology for developing total costs related to environmental impacts is discussed. 

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