Profit And Loss And Balance Sheets Page 6
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26Fixed Assets - Valuable Items
stock will either have gained (appreciated)
Not Easily Turned Into Cash
or lost (depreciated) in value, for instance
The balance sheet should include all
if there’s a shortage and you could sell it
fixed assets - the value of buildings, land,
for a much higher price?
large machinery and so on - minus any
Work In Progress : This is the price of stock
depreciation that period that you have
plus the value of work so far; but suppose
already allowed for in your profit and loss
a customer has cancelled an order?
account. For fixed assets this must be what
the asset could be sold for - its ’book value’.
2 : Liabilities - The Value Of Debts
Land and property often has an increasing
Owed By The Business
book value because the value of such things
Examples of kinds of liabilities are:
generally rises. Other assets are valued at
what they could be sold for and usually have
.
Loans - only count the residual amount
a decreasing value as they are used and
owing not the original amount
wear out. This is called ’depreciation’.
.
Bank overdrafts - this will either be the
amount you are overdrawn or the closing
Current Assets - Cash Or Things Whose
balance of your cash flow forecast
Value Can Be Realised More Easily
(if negative)
The value of fixed assets is usually estimated
.
Creditors - money you owe which you
but can be very accurate. Not so ’current
will have to pay
assets’. Their value is only partly ’real’.
The main kinds of current assets are:
.
Tax payable - your accountant can
.
calculate the tax liability based on the
Cash
year’s performance and change in the
.
Debtors
value of your assets and liabilities.
.
Stock
Liabilities are either ’long-term’
.
Work In Progress
or ’short-term’.
.
Cash : The figure for your cash should be
Long Term Liabilities - Loans (the
the final balance in your cashbook at the
remaining amount), bank overdraft
end of the period. If you are preparing a
.
Short Term Liabilities - Money you owe
forecast balance sheet then the cash figure
on bills not paid (creditors) or accruals*
will be the closing balance from your
* Accruals are the value of things that you
cash flow forecast.
have received but not yet paid for. It could
Debtors : Debtors are the value of money or
be the value of power from the power
debts owed by your customers at the end of
company, or materials that have yet to
the period (although you may have to write
be invoiced for or rent on the building
off a proportion of old or bad debts that you
which you pay in arrears.
expect will never be paid).
Stock : This figure will be the value of the
3 : Capital
stock that you have at the end of the year,
Capital is the money raised so far from
not yet sold. Usually this is based on what
’start-up’ finance and ’profits’ on trading
you paid for it but in some situations the
year after year.
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