Balance sheet 2
Date: 2015-10-07; view: 519.
Think of an organization you are interested in. What are its main assets? Which of them could be shown on its balance sheet?
Over to you
AÀ company s liabilities are its debts to suppliers, lenders, bondholders, the tax authorities, etc. Current liabilities are debts that have to be paid within a year, for example:
- creditors:moneyowed to suppliers etc.
- overdrafts: when the company spends more money than it has in its hank accounts.
- interest payments that have to be paid in the short term.
- tax payable.
Long;-term liabilities are debts that have to be paid further into the future, for example long-term bank loans and bonds.
勁: creditors; AmE:accounts payable or- payables
BWhen you deduct a company's liabilities (everything it owes) from its assets (everything it owns, you areleft with shareholders' funds. In theory, this is what would be left for shareholders it the business stopped operating, paid all its debts, obtained everything; that was owed to it and sold all its buildings and equipment.
Shareholders' funds as shown in a company accounts includes:
- The share capital' the shareholders have invested.
- the profits that have not been paid out in dividends' to shareholders over the years, but have been kept by the company as retained earnings, also called reserves.
BrE: shareholders' funds AmE:shareholders'/owners' equity
This is, the other half of the balance sheet . Complete the assets, table with expressions from A and B opposite, and the relevant figures, using the following information:
- Paãadigm has a bank loan of $20,000 to be repaid in three years.
- It has issued $100,000 worth of shares.
- It has issued bonds for $30,000 that it will have to repay in seven years.
- It has retained earnings of $I0,500.
- It has to pay $3,500 in interest on its bank borrowing and bonds.
-It owes $5,000 in tax.
-It owes $.6,000 to suppliers and others.
- On one of its bank accounts, Parad³gm has spent $2,000 more than it had in the account.
| LIABILITIES | |||
| 6.000 | |||
| 5.000 | |||
| Total current liabilities | 16,500 | ||
| Bank loàn råpaóàble in 3 years | |||
| Total long-term liabilities | 50,000 | ||
| Shareholders' funds | 110,500 | ||
| TOTAL LIABILITIES PLUS Shareholders' Funds | 177,000 |
Using the information in B opposite and in the table above, decide if these statements about Paradigm's liabilities are true or false.
1. The creditors item includes debts that will have to be paid in two or three years.
2. Overdrafts are a form of long-term loan.
3. In the coming year, Paradigm will have to pay more tax than it pays out in interest on its loans.
4. Paradigm has borrowed more in the form of bonds than in the form of bank loans.
5. Share capital of $100,000 is the current value of Ðaãad³gm's shares on the stock market.
6. Retainåd earnings is the total of all the dividends that have been paid out to shareholders over the years.
| <== previous lecture | | | next lecture ==> |
| Note: the terms' depreciate' and 'depreciation' are usually used in the UK; 'amortize' and 'amortization' are more common in the USA. | | | B Types of cashflow |