Balancing a balance sheet can be a grueling task for most accounting students. Though an integral part of their study, many struggles to score in this area. Is it really that monstrous? Let us look at the problem from an insider’s view point.
What is a balance sheet?
A balance sheet, in simple terms, refers to a statement of financial position, be it of a sole proprietorship, partnership or a company. It indicates financial health of a concern as on a particular date. It lists assets, liabilities and ownership equity. The difference between assets and liabilities will be the net worth or capital of concerns.
Main components of balance sheet
While solving balance sheet homework answers, a major question to balance both sides. I have seen students tearing their hair out, trying to tally their assets and liabilities. To balance, first, we should understand its components
- Current assets: This refers to assets which are temporary or perishable in nature. It includes cash and other short term assets like debts receivable, stock in hand,
- Non-current or fixed assets: These are assets of a permanent nature i.e. not likely to be exhausted in near future. It includes all buildings and land owned by the entity as well as heavy machinery and equipment. Goodwill earned by entities is also grouped under this category.
- Current liabilities: All the amounts payable to creditors within a year and all accrued expenses come under current liabilities. It also includes all current taxes payable.
- Non-current liabilities: All long-term loans and deferred tax liabilities from the past qualify as non-current liabilities.
- Owner’s equity: Difference between assets and liabilities will be net worth. It includes stocks and share capital, retained earnings and accumulated reserves.
Common problems faced by students
While learning capacity and aptitude may vary from person to person, there are some concerns which are often raised by most students.
Yes, classifying given items into assets and liabilities can be tricky, especially when number of items is huge. I have heard doubts like “how can you say debt receivable is an asset when you have not actually got it?” Classifying as short term and long term also causes trouble. All abstract items are found to distract students. While solving balance sheet homework answers, most stumble in classifying.
The essence of a balance sheet is that both sides should tally.This is because it is prepared based on double entry principles. Every transaction is recorded in two different accounts. This helps to cross-check accuracy also. So if it does not match, you panic. For perfect balancing, all items should be on proper sides and correctly calculated. If you have learned your texts properly, you will know where to place figures, and you can get perfect balance sheet homework answers.
- Large volume of information:
Unlike science subjects, accounting questions, especially those related to balance sheets, are very lengthy. There will be a long list of items and transactions for you to manipulate. It gets on the nerves of some students. It takes some effort to understand and analyze given information. Key is to practice lots so that you are thorough with every possibility.
- Numbers and calculations:
Accounting is all about figures and numbers. If you are interested in an accounting career, learn to love numbers. Balance sheets are not for those who hate numbers.
How to excel in balance sheet homework answers
To become proficient in preparing balance sheets, you need to be good in theories and also practice a lot. Once learned properly, balancing a lengthy question is a cakewalk.
- Be thorough with terminology:
Terms of accountancy are tricky. Learn the proper meaning of terms. For example, sundry debtors would mean the same as accounts receivable for purposes of balance sheet. Be aware of all usages of any term so that you do not get confused in exams.
- Master classifications:
Learn what all are assets and liabilities. Some you understand with basic common sense. You don’t need to ask anyone to know whether cash in bank is an asset or liability. But some items are tricky like pre-paid expenses which are categorized as assets. Another point to note is to classify short term and long term items. Though both short and long term assets will appear on same side, a wrong classification can diminish marks awarded. There is no way other than learning meticulously.
- Taking online help:
Gone are the days when text books were your only resource for studying. In today’s tech-savvy world, there are numerous educational websites which help students in every topic. Help is readily available if you are keen on perfection. These sites offer balance sheet homework answers, which greatly help accountancy students. There are several advantages of taking online help.
- It helps in completing all homework within the given time frame. Good sites always follow deadlines in submission.
- They promote better understanding of concepts. Several sites have facilities for online chats with experts whereby you can get all doubts cleared immediately.
- The sites mostly have practice papers which help students to prepare themselves in best way possible.
- If you want good grades in exams, best option is to get online help rather than running to libraries to read fat books on accounting.
Nevertheless, let me add a word of caution here. Before taking online help, make sure that it is a credible site and has a history of completing work in time. Also, check out the quality of previous work done by them. If the site is dependable and has a team of experts working for it, you can go for it and get your work done.
- Practise till you achieve perfection:
There is no short cut to hard work. Practice lots of sample questions so that you will have in-depth knowledge of every possibility. Take previous question papers from your peers and solve them. More you practice, sharper your concepts will be.
Getting perfect grades in balance sheets is not a difficult task, provided you are willing to work. Once you are a master, thesky is the limit for you.