This is
stated on a separate page called the balance sheet
1. List all your assets (money you expect to earn in the future) and liabilities (money you will have to pay in the future). Typically, these are financial transactions that are not income or expenses. These should include: a. Fixed (long term) Assets: Land, buildings, fixed plant and machinery, cars, etc. Also include accumulated depreciation on all assets. b. Current (short term) Assets: Stock, Work in Progress, Debtors (money owed to you), Prepaid expenses, Cash, Bank balances c. Current Liabilities: Creditors (money owed by you), accrued expenses, bank overdrafts. d. Non-current liabilities: total cash received from all loans less all repayments less interest included in the repayments.
2. State your interest in the business. a. Profit and loss account: The total profits and losses earned since the very beginning. Add in the current year’s net profit. b. Share capital (companies) or capital introduced (sole traders and partnerships): Personal money you paid to the business to get it started up and keep it running. c. Drawings: Money you have drawn from the business. (If your business is a company, your drawings will show as director’s remuneration in the income statement. If you are trading as a sole trader or partnership, your drawings will be included here in the balance sheet) d. Reserves: If your assets are worth more than what you paid for them, your may have a revaluation reserve here to show the appreciation in value. For example, if land has increased by £10,000, the Fixed Assets will be stated at cost plus £10,000 and revaluation reserve will be £10,000. 3. Calculate the following totals: a. Net assets in ‘1’ above b. Your interest in the business in ‘2’ above (this should be the same amount as the net assets) c. When your balance sheet balances (‘a’ equals ‘b’) you can calculate totals for fixed assets, current assets, current liabilities and long term liabilities. |