Define the Term ‘Balance Sheet Equation’ Using Examples - Accounting and Finance Assignment Help

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Assignment 2

Question 1 Define the term ‘Balance Sheet Equation’ using examples in your answer. Write up to 1 paragraph.

Question 2 What is a balance sheet made up of? Write up to 1 paragraph.

Question 3 Describe 2 balance sheet formats – which is considered the easiest to read? Write up to 200 words.

Question 4 Why is it important to separate current assets from fixed current assets and current liabilities from longterm/deferred liabilities on the balance sheet? How can separating this information help someone reading it? What does each of these 4 terms mean? Aim for ½ a page.

Question 5 How would you know if a balance sheet was incorrect? Write up to 1 paragraph.

Question 6 Show the equations used for determining a business’s working capital.

Question 7 If a business has a working capital ratio of 5:1 what does this say about the business’s liquidity? Write up to 2 paragraphs.

Question 8 If a business paid an electricity bill of $200 how would this appear on the balance sheet?

Question 9 Show where the following transactions and items would appear on a balance sheet – use the headings provided.

•  Building and land
•  Computers
•  Cash at bank
•  Loan from the bank
•  Accounts receivable
•  Money invested by the owner
• Accounts payable
•  Equipment
•  Stock on hand (for sale)
•  Deferred tax on a property devaluation Question 10 Using the information provided. Prepare a Balance Sheet statement for the year ending 30/6/2011. Submit your statement in both T form and in the Narrative (report) form. Business: Steel’s Corporate Removalists

a) Cash at bank $30,000

b) Accounts receivable $15,000 (amounts owed by customers)

c) Buildings $250,000 d) Vehicles $150,000

e) Equipment $10,000

f) Office equipment $10,000

g) Office furniture $5,000 h) Accounts payable $5,000

i) Loan payment $10,000 for the current year, for a loan of $50,000 due in 2016 Question 11 Work out Steel’s Corporate Removalists working capital using the figures you arrived at in your balance sheet (from the previous question). Would you consider this business to be able to meet its current liabilities? Write up to 1 paragraph. Question 12 Elina’s Yoga School: on the 1st July 2011 Elina started her Yoga school. She contributed: $5,000 in cash; she paid (cash) $150,000 for a building and paid $15,000 cash for equipment to start up her business. During July 2011 she had the following transactions:

• 1st July she paid $500 in advertising
• 8th July she paid an electrician to wire up her building $1000
•  15th she collected $1500 in student’s fees
•  22nd she organised a yoga day for a corporate business on credit (30days) $1500
•  31st she paid $1000 in wages
•  31st she secured a $1000 overdraft due the end of the following month

a) Now prepare 5 balance sheets using the information provided and for the above transactions i.e. one balance sheet at the end of each week (i.e. 1st, 8th, 15th and 22nd) and one on the 31st (at the end of the month).

b) What is Elina’s business’s financial liquidity at the end of this month?

c) How much owner’s equity does Elina have in her business? Describe the term ‘owner’s equity’ in your own words.

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