Week 3 notes for ACC1007 PDF

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notes for this week of lectures and workshops...

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Week 3: Balance Sheet

The Balance Sheet is a financial statement that details the entity’s assets, liabilities and equity as at a particular point in time — the end of the reporting period. More specifically, the balance sheet summarises at a point in time: •Assets - what the entity owns (or controls) as at a particular date •Liabilities - the external claims on the entity’s assets (what is owed) •Equity - the internal claim on the entity’s assets (what the owner is entitled to). Note that this is also referred to as “owner’s equity”

The balance sheet must always balance. Total Assets ($87,770) will always equal Total Liabilities ($51,400) plus Total Equity ($36,370).

The distinction between current assets and non-current assets is based on the timing of the future economic benefits. If the economic benefits of the asset are expected to be realised within the next reporting period (generally assumed to be 12 months), then the asset is categorised as current. •Inventory is a current asset, as the economic benefits attached to this asset is likely to be realised within the next 12 months (the stock is likely to be sold and converted to cash in that period) •Property is a non-current asset as the economic benefits attached to this asset will be realised over a period longer than 12 months (there will be benefits for the business from owning property for more than 12 months)

Similarly, the distinction between current liabilities and non-current liabilities is based on the timing of the expected future sacrifices. If the outflow of resources attached to the liability are expected to be realised within the next reporting period (assumed to be 12 months), then liability is categorised as current....