Prepare Balance Sheet from the given data, but be careful, every item will not be appeared in Balance Sheet.Land 25000Building 125000A/c payable 30000Cash 15000Note payable 25800Sales 550000Office supplies 5000Bank 17000A/c receivable 15000Amir-capital ?Salaries payable 32500Short-term investment 58000Office salaries expense 12500Prepaid advertising 36000Commission revenue 256900
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Answer:
Knowing what a balance sheet is crucial. You can find our sample balance sheet at the end of the article.
A balance sheet is a snapshot of the financial condition of a business at a specific moment in time, usually at the close of an accounting period.
A balance sheet comprises assets, liabilities, and owners’ or stockholders’ equity. Assets and liabilities are divided into short- and long-term obligations, including cash accounts such as checking, money market, or government securities.
At any given time, assets must equal liabilities plus owners’ equity. An asset is anything the business owns that has monetary value. Liabilities are the claims of creditors against the assets of the business. So when you create a balance sheet, you must make sure that it balances. The way you do this is by increasing or decreasing the liabilities’ side of the sheet so that it equals the assets’ side. More specifically, the part of the liabilities’ side that you adjust is the owners’ equity.
It might sound as if owners’ equity falls under the category of liabilities, but essentially you can think of it as the value that is owed from the business to the owners. In other words, you carefully add up the assets on the left side of the balance sheet and then add up all of the liabilities on the right side of the balance sheet and then subtract the liabilities from the assets. The net number is the owners’ equity. It is, of course, possible that the owners’ equity is negative if the liabilities are greater than the assets.
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