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Copyright 2006 Pearson Education Canada Inc. 9-2
Outline
The Balance Sheet Balance Sheet Formats The Classified Balance Sheet Assets Liabilities Shareholders’ Equity Statement of Retained Earnings
Copyright 2006 Pearson Education Canada Inc. 9-3
The Balance Sheet
A basic financial statement Reports the financial status of a company at
a point in time Includes assets, liabilities and shareholders’
equity accounts A classified balance sheet provides users
useful information concerning the firm’s financial position of the company
Copyright 2006 Pearson Education Canada Inc. 9-5
The Classified Balance Sheet
ASSETS, LIABILITIES, AND EQUITY ACCOUNTSARE CLASSIFIED INTO ACCOUNT CATEGORIES
Copyright 2006 Pearson Education Canada Inc. 9-6
Current Assets
Cash and other items that can be converted into cash or consumed by the business within one year from the balance sheet date
Copyright 2006 Pearson Education Canada Inc. 9-7
Hospitality Sample Firm Co., Inc.Balance SheetDecember 31, 2007 In thousands of dollars
AssetsCurrent assets Cash Marketable securities Accounts receivable less: allowance for doubtful accounts of $420 Inventories Prepaid expenses
Total current assets
$4,080 600
2,0602,2001,300
$10,240
Copyright 2006 Pearson Education Canada Inc. 9-8
Property and Equipment Land Buildings Furniture, fixtures, and equipment
Total property and equipment Less: accumulated depreciation
Net property and equipment
$16,80073,00020,100
109,900 14,100 $95,800
PROPERTY AND EQUIPMENTAssets used in operations to produce revenues
Copyright 2006 Pearson Education Canada Inc. 9-9
Items with a future value which are not used in operations
Intangible assets: Goodwill, trademarks, patents, pre-opening expenses
Long-term investments: Investments in subsidiaries & restricted cash
Long-term receivables Cash surrender value of officer’s life
insurance
OTHER ASSETS
Copyright 2006 Pearson Education Canada Inc. 9-10
Other Assets Deferred charges Investments and advances to affiliates Other
Total other assets
$ 2,25010,200 600
$13,050
OTHER ASSETS
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Liabilities
Current Liabilities Due within one year from balance sheet date
Copyright 2006 Pearson Education Canada Inc. 9-12
Current liabilities Current portion of long-term debt Account payable Income taxes payable Accrued expensesTotal Current liabilities
$3,000 1,400 200 1,800
CURRENT LIABILITIES
$6,400
Copyright 2006 Pearson Education Canada Inc. 9-13
Long Term Liabilities
Due after one year from balance sheet date
Copyright 2006 Pearson Education Canada Inc. 9-14
Shareholder’s Equity
Preferred Stock Common Stock Retained Earnings Treasury Stock
Copyright 2006 Pearson Education Canada Inc. 9-15
Shareholders’ Equity
Ownership in Corp. Preferred shareholders
have preferences on earnings and upon liquidation.
Copyright 2006 Pearson Education Canada Inc. 9-16
RETAINED EARNINGS
Accumulated net income not distributed in the form of dividends
Separate statement of retained earnings
Copyright 2006 Pearson Education Canada Inc. 9-17
TREASURY STOCK Stock re-acquired by the company
Reduces number of shares outstanding
Deduction from shareholders’ equity
Copyright 2006 Pearson Education Canada Inc. 9-18
Shareholders’ Equity
Common Stock $1,650
Additional Paid in Capital 4,100
Retained Earnings 2,140
Total Shareholders’ Equity $7,890
Copyright 2006 Pearson Education Canada Inc. 9-19
Statement of Retained Earnings
Includes the detail of changes affecting the retained earnings account during the accounting period
Two main elements affect the change in retained earnings between two accounting periods:
Net income or net loss Dividends declared by
the corporation