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Finances
Accounting plays an important role in any business.
Why do you think it is important for a business to keep track of its expenses?
Lesson Objective
Create a balance sheet.
Content Vocabulary
balance sheetbalance sheet
A statement that shows a company’s total assets, total liabilities, and owner’s equity on a given date.
balance sheet
A statement that shows a company’s total assets, total liabilities, and owner’s equity on a given date.
vertical analysis
current ratio
horizontal analysis
vertical analysis
Used to find what percent any item in a financial statement is of the totals in the statement.
vertical analysis
Used to find what percent any item in a financial statement is of the totals in the statement.
current ratio
The ratio of the total assets to total liabilities.
current ratio
The ratio of the total assets to total liabilities.
horizontal analysis
Comparing two or more income statements for different periods by calculating the dollar amount and the percent change from one time period to another.
horizontal analysis
Comparing two or more income statements for different periods by calculating the dollar amount and the percent change from one time period to another.
The Agees used $60,000 of their own money plus a $25,000 loan to start their clothing store. They received two shipments of merchandise. They paid cash for the $15,000 shipment. They did not pay immediately for the $8,000 shipment. They bought supplies for $10,000. They have $60,000 left in cash.
What does their balance sheet show?
Example 1Example 1
Step: Figure out the balance sheet.
Example 1 AnswerExample 1 Answer
Find the total assets, total liabilities, and owner’s equity.
Cash: $90,035
Merchandise: $359,352
Bank loan: $109,000
Taxes owed: $45,982
Practice 1Practice 1
Total assets: $449,387
Total liabilities: $154,982
Owner’s equity: $294,405
Practice 1 AnswerPractice 1 Answer
Find the total assets, total liabilities, and owner’s equity.
Cash: $178,398
Merchandise: $987,200
Building: $675,230
Bank loan: $275,675
Taxes owed: $25,000
Practice 2Practice 2
Total assets: $1,840,828
Total liabilities: $300,675
Owner’s equity: $1,540,153
Practice 2 AnswerPractice 2 Answer
