acct120 class #8 the balance sheet
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Introduction Introduction toto
Accounting Accounting 120120
Mr. Binet / Moncton High School
Class #8: The Balance Sheet
1. You will be introduced the marvel that is… The Balance Sheet!
2. We will have a chance to examine what is your “networth”.
3. We will have some practice with identifying what liabilities and assets are in an assignment.
In Today’s Class…In Today’s Class…
Financial position is the monetary value of an individual or company. To determine the financial position of a company or an individual, simply:
Determine Assets:Assets are things that are owned and have value. An example of an asset is: Computer $3 500.00.
Determine Liabilities:Liabilities are debts, also known as, claims against the assets. An example of a liability is: Bank Loan $1 500.00.
Determine Owner's Equity:Determine the difference between the total assets and total liabilities. Owner's Equity is also referred to as Capital, Equity or Net Worth.
Financial PositionFinancial Position
Can you determine what an asset is compared to a liability?
Cash Bicycle Mortgage House Bank Loan Stereo IOU to Friend
Financial PositionFinancial Position
Total assets minus total liabilities equal owner's equity. This relationship is known as the Fundamental Accounting Equation:
A - L = OEAssets - Liabilities = Owner's Equity
The equation may also be stated as: A = L + OE
Assets = Liabilities + Owner's Equity The fundamental accounting equation
is the basis of accounting theory.
The Fundamental Accounting EquationThe Fundamental Accounting Equation
Using the fundamental accounting equation, let's determine the financial position of Samantha Palmer, a student. The following is a list of her assets and liabilities.
Step One: List and total assets:
Samantha’s Financial PositionSamantha’s Financial Position
Step Two: List Liabilities
Step Three: Using the Fundamental Accounting Equation to determine Net Worth (A – L = OE)…
Samantha’s Financial PositionSamantha’s Financial Position
Samantha's owner's equity or net worth is $4 738.00.
Samantha’s Financial PositionSamantha’s Financial Position
The total monetary value of assets and the total monetary value of liabilities change on a daily basis. This has a direct effect on the monetary value of the owner's equity. The fundamental accounting equation allows us to analyze these changes. Review the following example, demonstrating changes:
Suppose the fundamental accounting equation is:
Assets ($80 000) - Liabilities ($25 000) = Owner's Equity ($55 000)
Changes to the Fundamental Accounting EquationChanges to the Fundamental Accounting Equation
Now assume assets increased by $10 000 and liabilities decreased by $2 000. What happens to the financial position?
Assets ($80 000+$10 000) - Liabilities ($25 000 - $2 000) = Owner's Equity (?)
Assets ($90 000) - Liabilities ($23 000) = Owner's Equity ($67 000)Now assume assets increased by $8 000 and owner's equity decreased by $5 000. What happens to the financial position?
Assets ($90 000 + $8 000) - Liabilities (?) = Owner's Equity ($67 000 - $5 000)
Assets ($98 000) - Liabilities ($36 000) = Owner's Equity ($62 000)
Changes to the Fundamental Accounting EquationChanges to the Fundamental Accounting Equation
Now assume assets increased by $10 000 and liabilities decreased by $2 000. What happens to the financial position?
Assets ($80 000+$10 000) - Liabilities ($25 000 - $2 000) = Owner's Equity (?)
Assets ($90 000) - Liabilities ($23 000) = Owner's Equity ($67 000)Now assume assets increased by $8 000 and owner's equity decreased by $5 000. What happens to the financial position?
Assets ($90 000 + $8 000) - Liabilities (?) = Owner's Equity ($67 000 - $5 000)
Assets ($98 000) - Liabilities ($36 000) = Owner's Equity ($62 000)
Changes to the Fundamental Accounting EquationChanges to the Fundamental Accounting Equation
Go to the O: drive and in the “BINET” folder find assignment #1. Open it, and immediately “SAVE AS” on to your “U” drive.
Go ahead and complete (individually) the assignment.
Take your time and go over it slowly, this is a basis for the rest of the course!
Login to your email (https://exchange.nbss.nbed.nb.ca).
When you are finished, submit the assignment to me via e-mail ([email protected]) with the subject “Unit 2, Assignment 1”.
Accounting Equation AssignmentAccounting Equation Assignment