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ENT_PS_Unit12_Lesson3_Final

This document outlines the importance and preparation of a balance sheet for businesses, highlighting its role in showcasing assets, liabilities, and equity at a specific point in time. It details the components of a balance sheet, including current and noncurrent assets and liabilities, and provides a step-by-step guide for creating one. The document emphasizes that the total assets must equal the sum of total liabilities and equity.

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Aileen Buensalida
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1 views

ENT_PS_Unit12_Lesson3_Final

This document outlines the importance and preparation of a balance sheet for businesses, highlighting its role in showcasing assets, liabilities, and equity at a specific point in time. It details the components of a balance sheet, including current and noncurrent assets and liabilities, and provides a step-by-step guide for creating one. The document emphasizes that the total assets must equal the sum of total liabilities and equity.

Uploaded by

Aileen Buensalida
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Unit 12: Financial Forecasting

Lesson 3
Balance Sheet Preparation

Entrepreneurship
Senior High School Applied - Academic
What is the importance
of a balance sheet for a
business?

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Learning ● Identify the concepts in the
Objective balance sheet financial
s statement.
At the end of the
lesson, you
● Understand the steps involved
should be able to in balance sheet preparation.
do the following:

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1. What drives you to start a business?
2. Which do you use more in paying for your
purchases—credit card or cash?
3. If you have a business, what steps will you
take to avoid going into bankruptcy?

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Balance Sheet

It is a statement that
shows the assets,
liabilities, and equity of
a business during a
certain period of time.

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Purpose and Uses of a Balance Sheet

to inform interested third parties about


the financial health or financial position
of a business at a particular point in time
by showing them the business assets,
liabilities, and equity

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Components of Balance Sheet

The equation used in


any balance sheet is
Assets = Liabilities
+ Equity

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Components of Balance Sheet

1.Assets
Assets represent all of the investments
of a business, which include cash,
accounts receivable, inventory of goods,
machinery, tools, equipment, facilities,
and so forth.
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Components of Balance Sheet
A.Current assets - These assets are
generally what the business expects to
turn into cash within a period of one
year.
B.Noncurrent assets - These assets are
referred to as the long-term investments
that the business reckons to hold for at
least
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one
EXPLO
year.
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Components of Balance Sheet

2.Liabilities
The liabilities of a business pertain to
anything that it owes to the suppliers,
banks, the government, to its
employees, and to other financial
institutions.
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Components of Balance Sheet

A.Current liabilities - These are the


liabilities of a business that are usually
due within a period of one year.
B.Noncurrent liabilities - These are the
liabilities that a business doesn’t expect
to settle within a period of one year.
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Components of Balance Sheet

3.Equity
Equity primarily refers to the net worth
of a business—the amount of money left
after selling all its assets and after
paying its liabilities.

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Remember

By rearranging the original


formula used in a balance sheet,
the equation for equity would be
Equity = Assets - Liabilities.

13
Balance Sheet Preparation

1.Determine the reporting period.


A balance sheet is created to be able to
show the business’s assets, liabilities,
and equity on a particular date, which is
referred to as the reporting date.

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Balance Sheet Preparation

2.List down the assets and liabilities.


After identifying the reporting date, the
next step would be tallying of all the
assets of the business on one side and
all its liabilities on the other side.

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Balance Sheet Preparation

3.Calculate and list down the equity.


If a business is owned by a sole
proprietor, the equity would be direct
and easier to point out.

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Balance Sheet Preparation

4.Add the total liabilities and total


equity and compare them to assets.
The final step is very crucial since this is
the phase where it will be determined
whether the balance sheet is accurately
done.
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Example: Balance Sheet

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Tip

Always remember that the total


assets of the business must be
equal to the sum of its total
liabilities and total equity.

19
Activity

Briefly explain the significance of a balance


sheet in any kind of business.

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Questions
Part A. Answer the following questions
briefly and coherently:
1. How would you define a balance sheet?
2. What importance does a balance sheet
entail in establishing one’s own
business?
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Questions
3. What do you mean by equity in the
balance sheet?
4. How will you compare assets with
liabilities?
5. Why do analysts refer to the balance
sheet of a business entity?
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Questions
Part B. Read the situation below, then follow the
given instructions.

An entrepreneur owns a small supplies store that


sells different school and office items such as
pens, pad paper, bond paper, printers, envelopes,
and so forth. His store is located along Timog
Avenue in Quezon City, and he pays P20,000 for
its monthly lease.
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Questions
It also has one delivery van that is used for
the shipment of bulk orders to various
customers.

Based on the information above, identify the


current and possible assets, liabilities, and
equity of the supplies store.
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Wrap Up

A balance sheet, which is sometimes


referred to as the statement of
financial position, is one of the financial
statements that provide for the so-called
“book value” of a business.

25
Wrap Up

The equation used in any balance sheet is


Assets = Liabilities + Equity.

26
Wrap Up

27
Bibliography

Birkinshaw, Julian M. Entrepreneurship in the Global Firm. Thousand Oaks, California: SAGE,
2000.

Horngren, Charles T. Accounting. Toronto: Pearson Canada, 2014.

Kariv Dafna. Entrepreneurship: An International Introduction. New York, NY: Routledge, 2011.

Meigs, Robert F. Accounting: The Basis for Business Decisions. Toronto: McGraw-Hill Ryerson,
2003.

Nwankwo, Sonny, and Ayantunji Gbadamosi. Entrepreneurship Marketing: Principles and


Practice of SME
Marketing. New York: Routledge, 2011.

28

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