Реферат: Double Entry Types of Balance Sheet

Dr Cash Cr

$20

Cash

Dr Cr

Books $20

If all transactions are entered into the books in this way, then the sum of all of the debits would equal the sum of all of the credits.

Balance Sheet

Balance Sheet is one of the three main Financial Statements. It reflects structure of the company's assets and financing sources used to finance these assets as of particular date (i.e. as of year end).

Referring to the Accounting Equation, where:

Assets

=

Liabilities

+

Equity

Balance Sheet reflects the same principle, i.e. one side of the Balance Sheet represents Assets and the other side - Liabilities and Equity. The must be a balance between the total value of the Assets and the total value of Liabilities and Equity.

Assets are properties (can be material, immaterial, monetary) owned by the entity, i.e. any physical thing (tangible) or right (intangible) that has a monetary value. Assets usually are divided into Current Assets (cash and other assets that may reasonably be expected to realized in cash or sold or used within period less or equal to one year. Examples: inventory, cash, accounts receivable, prepaid expenses) and Long-term Assets (used by the entity for a period longer that one year. Examples: long-term investments, fixed assets, intangible long-term assets).

Liabilities are debts owned to outsiders, i.e. creditors. Divided into Current Liabilities, which are due within one year (accounts payable, salaries payable, taxes payable, interest payable) and Long-term Liabilities which are due after one year

Equity includes amounts invested in a business by owners, special kind of liability residual claim against assets of business after total liabilities are deducted. Includes Share Capital (financial means invested by the shareholders), Retained Earnings – net income retained in the business.

Below there is an example of the Balance Sheet:

You can see that total value of the Assets ($50650) equals to the total value of Liabilities ($17900) and Equity ($32750).

Trial Balance

A trial balance is a list of all of the ledger accounts of a business and the balance of each. Debits are shown as positive numbers and credits as negative numbers. The trial balance should therefore always equal zero.

If the journal entries are error-free and were posted properly to the general ledger, the total of all of the debit balances should equal the total of all of the credit balances. If the debits do not equal the credits, then an error has occurred somewhere in the process. The total of the accounts on the debit and credit side is referred to as the trial balance.

The more often that the trial balance is calculated during the accounting cycle, the easier it is to isolate any errors; more frequent trial balance calculations narrow the time frame in which an error might have occurred, resulting in fewer transactions through which to search.

Interpreting Balance Sheet

1. ASSETS DEBIT balance = positive amount. CREDIT balance = negative amount

Cash Always review the status of your cash. A cash deficit should rarely

occur. Cash represents the liquidity of your fund and its ability to pay its expenses. It is very important to make sure your cash remains

positive.

Petty Cash Periodically review the level of your petty cash fund. Remember that

petty cash is quite vulnerable to loss through fraud or error. Can you reduce the size of the fund without affecting efficiency?

Receivables When you review your receivables balance, make sure your