Chapter 2 Notes - The Balance Sheet

2.1 Financial PositionAssets—Liabilities—

Accounting EquationA – L = OE

Can be rearranged and more common(Assets = Liabilities – Owner’s Equity)

AssignmentPage 20 #1, 2, 5 as a classPage 20 #3, 4, 5 individually in your notes

Balance Sheet – statement showing the ________________ of a person, business or organization.

Formats of balance sheets vary due to the accounting standards that govern private businesses and public companies. All share common purpose—to _____________________________.

Accounts receivable are the ______________________________. (Asset) They are known as a debtor (anyone who ___________ money to the business).

Accounts payable are the _______________________________. (Liability) Each of the suppliers’ owed money by the business is one of its creditors (anyone to whom the business owes money).

AssignmentPage 28-29—ex. 1a), 2 and 3 (write the answers on the handouts provided)

Figure 2.8: Completed Pacioli Designs Balance Sheet

Figure 2.15: Labels for Amy Beck’s Balance Sheet

Figure 2.16: Values for Amy Beck’s Balance Sheet

Figure 2.17: Formulas for Amy Beck’s Balance Sheet

2.3 Claims against the Assets Both __________________ and the __________________ have a claim on the assets They have either provided the __________________ used to acquire the assets or they have

provided the __________________ themselves Creditors’ Claims First If a business is closed down, who gets the assets?

They still belong to the __________________ and to the owner but the claims of the creditors will be settled first

The __________________ gets what is left after the claims of the creditors have been paid

Assignment: find a partner and complete Page 32 #1 and 2

Accounting Standards

Accountants throughout the world follow sets of rules or standards set by the Canadian Institute of Chartered Accountants

In 2011 the Generally Accepted Account Principles (__________________) were replaced by the International Financial Reporting Standards (__________________) for public companies (those listed on stock exchanges) to help Canadian businesses communicate globally

Private businesses may choose IFRS or ASPE (Accounting Standards for Private Enterprises) for their accounting practices

Business Entity Concept— keeps the accounting for a business __________________ from the personal affairs of the owner

Cost Principle– requires accountants to record the value of __________________ at cost price Continuing Concern Concept– the assumption that the business will continue operatingAccounting Standards __________________ Model— outlines an accounting procedure that allows accountants to

change the value of particular assets based on market conditions Allowed under the IFRS

IFRS and Balance Sheet FormatsClassified Balance Sheet

Current assets— __________________ and assets that will be converted into cash within one year e.g. Accounts Receivable Also include assets that will be used up within a year e.g. supplies

Long-term Assets– items like __________________, buildings and equipment (sometimes called property, plant, and equipment) These assets last longer than one year

Current Liabilities– those that are due within a __________________ e.g. Accounts Payable Long-term liabilities– take __________________ than a year to pay off e.g. Mortgage Payable

Statement of Financial Position Businesses using the IFRS change the name of the statement from Balance Sheet to Statement of

Financial Position and __________________ the order the assets and liabilities are shown on page 37 Figure 2.13

Chapter Assignments

Chapter 1 and 2 Test on ________________________________