The contents of a Balance Sheet/Statement of Financial Position

• While a Balance Sheet could just be presented as a listing of the credit and debit balances at a given date
• It would be more useful to record the information in a consistent and meaningful way
• This would allow stakeholders to quickly obtain the information that they are looking for in the books
• The following items are recorded in a typical Balance Sheet:

Assets

• These are shown under two headings:
• Fixed Assets and Current Assets

Fixed Assets

• These are assets that were not bought for resale but
• are to be used in the business
• are expected to be retained by the business for a long period (of more than one year from the Balance Sheet date)
• They are also known as Non-Current Assets
• Examples of Fixed Assets include: Land, Buildings, Motor Vehicles, Fixtures and Fittings etc
• They are shown first in the Balance Sheet
• Items that are expected to stay in the business longer are shown first for example:
• Land
• Buildings
• Motor Vehicles
• Fixtures and Fittings etc

Current Assets

• Are assets those Assets that are likely to change in the short term and certainly within 12 months of the Balance Sheet date
• These include items bought for resale (Stock), amounts owed by the business’s debtors (Debtors also known as Receivables), Cash at the Bank as well as Cash in hand
• These items are recorded in increasing order of liquidity i.e
• Those items that take longer to convert to cash are listed first for example:
• Stock
• Debtors
• Bank
• Cash
• Naturally Cash comes last as it is the most liquid asset
• Since Debtors can always be factored (i.e for cash) they appear after stock!

Liabilities

• There are two categories of liabilities:
• Long term/Non-current liabilities and
• Current Liabilities

Current Liabilities

• These typically appear before the Non Current Liabilities in the Balance Sheet
• They are items that have to paid within a year of the balance sheet date.
• Examples include bank overdrafts, amounts due to creditors for the purchase of goods for resale.

Non Current Liabilities

• Are also known as Long term liabilities
• They are items that have to be paid more than a year after the balance sheet
  date.
• Examples include bank loans, loans from other businesses and other types of instruments such as Debentures in Limited Liability businesses

Other items

• The Balance Sheet also includes the figures for Capital, Drawings and Profit for the year.
• The difference between Current Assets and Current Liabilities is known as Working Capital/ Net Current Assets

To access more topics go to the Principles of Accounts Notes.