Acct120 Class #8 The Balance Sheet
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Transcript of Acct120 Class #8 The Balance Sheet
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Introduction Introduction toto
Accounting Accounting 120120
Mr. Binet / Moncton High School
Class #8: The Balance Sheet
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1. You will be introduced the marvel that is… The Balance Sheet!
2. We will have a chance to examine what is your “networth”.
3. We will have some practice with identifying what liabilities and assets are in an assignment.
In Today’s Class…In Today’s Class…
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Financial position is the monetary value of an individual or company. To determine the financial position of a company or an individual, simply:
Determine Assets:Assets are things that are owned and have value. An example of an asset is: Computer $3 500.00.
Determine Liabilities:Liabilities are debts, also known as, claims against the assets. An example of a liability is: Bank Loan $1 500.00.
Determine Owner's Equity:Determine the difference between the total assets and total liabilities. Owner's Equity is also referred to as Capital, Equity or Net Worth.
Financial PositionFinancial Position
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Can you determine what an asset is compared to a liability?
Cash Bicycle Mortgage House Bank Loan Stereo IOU to Friend
Financial PositionFinancial Position
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Total assets minus total liabilities equal owner's equity. This relationship is known as the Fundamental Accounting Equation:
A - L = OEAssets - Liabilities = Owner's Equity
The equation may also be stated as: A = L + OE
Assets = Liabilities + Owner's Equity The fundamental accounting equation
is the basis of accounting theory.
The Fundamental Accounting EquationThe Fundamental Accounting Equation
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Using the fundamental accounting equation, let's determine the financial position of Samantha Palmer, a student. The following is a list of her assets and liabilities.
Step One: List and total assets:
Samantha’s Financial PositionSamantha’s Financial Position
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Step Two: List Liabilities
Step Three: Using the Fundamental Accounting Equation to determine Net Worth (A – L = OE)…
Samantha’s Financial PositionSamantha’s Financial Position
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Samantha's owner's equity or net worth is $4 738.00.
Samantha’s Financial PositionSamantha’s Financial Position
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The total monetary value of assets and the total monetary value of liabilities change on a daily basis. This has a direct effect on the monetary value of the owner's equity. The fundamental accounting equation allows us to analyze these changes. Review the following example, demonstrating changes:
Suppose the fundamental accounting equation is:
Assets ($80 000) - Liabilities ($25 000) = Owner's Equity ($55 000)
Changes to the Fundamental Accounting EquationChanges to the Fundamental Accounting Equation
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Now assume assets increased by $10 000 and liabilities decreased by $2 000. What happens to the financial position?
Assets ($80 000+$10 000) - Liabilities ($25 000 - $2 000) = Owner's Equity (?)
Assets ($90 000) - Liabilities ($23 000) = Owner's Equity ($67 000)Now assume assets increased by $8 000 and owner's equity decreased by $5 000. What happens to the financial position?
Assets ($90 000 + $8 000) - Liabilities (?) = Owner's Equity ($67 000 - $5 000)
Assets ($98 000) - Liabilities ($36 000) = Owner's Equity ($62 000)
Changes to the Fundamental Accounting EquationChanges to the Fundamental Accounting Equation
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Now assume assets increased by $10 000 and liabilities decreased by $2 000. What happens to the financial position?
Assets ($80 000+$10 000) - Liabilities ($25 000 - $2 000) = Owner's Equity (?)
Assets ($90 000) - Liabilities ($23 000) = Owner's Equity ($67 000)Now assume assets increased by $8 000 and owner's equity decreased by $5 000. What happens to the financial position?
Assets ($90 000 + $8 000) - Liabilities (?) = Owner's Equity ($67 000 - $5 000)
Assets ($98 000) - Liabilities ($36 000) = Owner's Equity ($62 000)
Changes to the Fundamental Accounting EquationChanges to the Fundamental Accounting Equation
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Go to the O: drive and in the “BINET” folder find assignment #1. Open it, and immediately “SAVE AS” on to your “U” drive.
Go ahead and complete (individually) the assignment.
Take your time and go over it slowly, this is a basis for the rest of the course!
Login to your email (https://exchange.nbss.nbed.nb.ca).
When you are finished, submit the assignment to me via e-mail ([email protected]) with the subject “Unit 2, Assignment 1”.
Accounting Equation AssignmentAccounting Equation Assignment