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Balance sheets

A balance sheet is a statement of a firm's assets, liabilities and owners' equity at a specific
date (i.e. it is a "snapshot" of the financial strength of a business at a particular moment in

It summarises the financial state of the business at that date. When…

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a) Cash in the bank.

b) Cash on the premises ("petty cash").

c) Debtors (customers who have purchased goods on credit, and have not yet paid).

d) Stock (raw materials, workinprogress and unsold finished goods).

e) Prepayments (where the business has paid in advance for the use of an item,…

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Shareholders funds

There are several other items that appear on a Balance Sheet most notably shareholders' funds
(also called 'owners equity') and reserves.

These items show us where the business got its original capital from (i.e. the money it used to
startup), how much money the shareholders have a claim…

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Share Capital 250
Reserves 190
Capital Employed 640 [200 + 250 + 190]
ASSETS EMPLOYED = CAPITAL EMPLOYED: the two parts MUST always balance.
Remember, a balance sheet shows what a company owns (assets), what it owes (liabilities) and
where the company got its money (capital) from at a specific…


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