Also considered as a statement of financial position of a company, a balance sheet reveals the assets, liabilities and ownerâ€™s equity of the company. Along with cash flow statement and income statement, balance sheet is an important part of a companyâ€™s financial statement. At any specific moment of time (usually at the accounting periodâ€™s end), the balance sheet provides a snapshot of the financial condition of a business. Being as important as it is, students of accounts and finance are often looking for balance sheet homework answers.
Dealing with balance sheets
Before you go ahead and start dealing with balance sheet, you would obviously want to know what a balance sheet is. As stated before, a balance sheet constitutes of the liabilities, assets and stockholderâ€™s or ownerâ€™s equity. Liabilities and assets are divided into long-term and short-term obligations, including cash accounts like checking, government securities or money market.
At any particular point of time, assets should be equal to ownersâ€™ equity plus liabilities. Anything owned by the business having monetary value is called an asset. The creditorâ€™s claim against the businessâ€™ assets is known as liabilities. Therefore, while creating a balance sheet, it is important that these two balances out.
You can do this by decreasing or increasing the liabilities side of the balance sheet, such that it is equal to assets side. To be more specific, it is the ownerâ€™s equity part of liabilities side that you have to adjust.
The very basics of all this might be confusing to you as a student. Before looking for balance sheet homework answers online, you might as well try understanding it first. If you get a hold of it, you will surely start finding it easy.
Of course, you can take help of online homework help company for understanding all about it and also to complete your homework. It is a very good option you have at your disposal, considering the benefits like expert assistance and 24/7 availability.
Some of the major points to note:
- Understand the Basic Equation
Before everything else, you need to know the very basic equation that a balance sheet calculates: The sum of assets of a company is equal to the value of ownerâ€™s equity and liabilities of the company. Just like any other mathematical equation, you may isolate a single category by simply shuffling other categories as per your requirements. For instance, you may calculate the value of companyâ€™s ownersâ€™ equity by calculating the difference between the value of assets and liabilities.
- Determining Assets
The things that are responsible for positive financial condition of a company include investments, money, assets, and products owned by the business that has value in cash. A company that is thriving financially would have assets greater than its liabilities. If that happens, there is a value created in the equity of stock of the company, thus opening up financing opportunities.
While writing your balance sheet homework answers, you must always remember listing your assets in terms of their liquidity. The liquidity of an asset is determined by the ease with which they can be turned into cash. Cash is itself the most liquid form of assets, whereas investments that are long-term are less liquid.
When it comes to annual balance sheet, you can list assets by Fixed Assets, which are long-term possessions that have a value in future or can be sold, and Current Assets, which can be converted to cash within the span of a year or maybe less.
Current Asset includes:
- Cash: All the money in savings or checking account
- Accounts receivable: Money that a customer or a client owes to the business
- Securities: Stocks, investments, bonds, etc.
- Pre-paid insurance: Advance payments for business insurance coverage and services
- Inventory: Materials or products that be acquired or created already for the motive of sale
Fixed Assets includes:
- Supplies: These are important materials for operations of the business, such as computers, company cars, office furniture, manufacturing equipment, etc.
- Intangible assets: Intellectual properties having intrinsic values like patents, trademarks, copyrights and other such company rights.
- Property: Land or office building that the business owns.
- Calculating Liabilities
The negative part of the equation in your balance sheet homework answers is the liabilities. These include debt, material expenses, and operational costs. In general terms, the value of a company is higher if the liabilities are lower. Fixed Liabilities are basically bills that are due any time after a year, while Current Liabilities include any debts that have to be paid out within the span of a year as well as cash spent.
Current Liabilities includes:
- Accounts payable: Any money that the business owes to its partners or suppliers.
- Operating line of credit: Money that the business owes to a bank that has extended it an operating line of credit.
- Business credit cards: Due bills of company credit card
- Owed Taxes: State and federal taxes owed for a year
- Payroll and Wages: These include employee compensation like medical insurance and wages.
- Revenue that is yet not earned: It is the revenue got from a product or service that is yet to be delivered to the client or customer.
Fixed Liabilities includes:
- Bonds payable: Bonds that are long-term and are owed to the government.
- Long-Term Mortgages
- Obligations for pension benefit: The money owed by the company to employee pension plans.
- Car loan: Loans on the company vehicles, along with costs for insurance.
- Shareholderâ€™s Loan
- Evaluating Equity
To estimate the value of capital of a company in your balance sheet homework answers, you can find the difference between the value of assets and the value of the liabilities. It can be bad for a company if a negative net worth results from the equation. In particular, a small business would find it difficult to secure financing. This is obviously dangerous, considering the fact that the companyâ€™s profits are already being overshadowed by its expenses.
However, if the company has positive equity, it means that there is an option in front of business owners to acquire capital through the sale of a part of their business through stocks, equity, and dividends. In a corporation, this is known as stockholderâ€™s equity whereas it is called ownersâ€™ equity in case of a sole proprietorship. Equity includes capital stock, opening balance equity, dividends, retained earnings, ownerâ€™s draw, etc. An income statement can be helpful in evaluating equity as it helps you determine retained earnings and opening balance equity.
- Considering the Applications
Being a part of a financial report, a sound balance sheet serves as an important financial statement. It not only indicates the present financial situation of a company, but it also helps a company in securing financing. It can even be useful in determining the worth of a company over time.
A comparison of the current liabilities and current assets on an annual basis will provide you an indication of the expenses and annual growth of a company. It helps determine if there is a space for improvement. You can get a rather long-term view of the value of the company by finding the difference between the values of the fixed assets and fixed liabilities. Dealing with balance sheets can be really interesting, even if you are a student who is relatively new to the concept of it.