What is a Balance Sheet?

Explains what a balance sheet is and what it must contains.

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  • Created by: Rukhsar
  • Created on: 09-04-10 09:45
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Rukhsar Hussain
What is a Balance Sheet?
A balance sheet is a snapshot of a business at a precise moment in time. It records
three things in a business:
Assets (things the business owns)
Liabilities (things the business owes)
How the business paid for the things it owns
There are two types of assets. There are fixed assets and current assets. A
current asset is something a business owns which they use up, usually within a
year. A current asset includes stock, debtors and cash. In a pizza plc a current
asset will include ingredients such as cheese. For example, every time pizza plc sell
a pizza the cash goes up but the value of stock goes down. Every time a franchise
pays their royalty fee the debtors goes down, the cash goes up. A fixed asset is
something that does not get used up in the production process. Examples of fixed
assets are delivery vehicles or ovens.
There are two types of liabilities, current liabilities and long-term liabilities. A
current liability is money that the business must pay back in the next 12 months
such as an overdraft. A long-term liability is money that the business pays after a
year such as a loan.


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