Balance Sheet 1

A) Assets money, and would have a value for any

1
A company's balance sheet gives a `snapshot
1 picture' of its assets and liabilities at the end of
a particular period, usually the 12-month
period of its financial year. But the snapshot
could be taken on any day of the year.
potential buyer of the company.
However, there are some things of value that
5 are never shown on a balance sheet, for
example the knowledge and skills of the
company's employees.

An asset is something that has value or the B) D epreciation

power to earn money for a business. Assets
Of course, some assets such as machinery and
include:
6 equipment lose their value over time because
1 current assets: they wear out and become obsolete and
2 out of date. Amounts relating to this are shown
 cash at the bank. as depreciation or amortization in the
accounts. For example, some computer
2  securities: investments in other
equipment is depreciated or
companies.
amortized over a very short period,
 stocks, of raw materials, perhaps as short as three years, and a
unfinished goods and finished charge for this is shown in the accounts. The
goods, that are going to be sold. value of the equipment is written down or
reduced each year over that period and
 debtors: money owed to the company written off completely at the end.
by customers.
7 The amount that is shown as the value of an
3
2 fixed or tangible assets: equipment, asset at a particular time is its book value.
buildings, land. This may or may not be its market value,
i.e. the amount that it could be sold for at that
3 intangible assets: for example, time. For example, land or buildings may be
4 goodwill, the value that the company thinks worth more than shown in the accounts
it has as a functioning organization with its because they have increased in value.
existing customers and in some cases brands Equipment may be worth less than shown in
because established have the power to earn it the accounts because its value has not been
depreciated by a realistic amount.
 BrE: stocks, AmE: inventories BrE: debtors, AmE: accounts receivable / receivables

Note: . 'depreciate' and 'depreciation' are usually used in the UK;

 'amortize' and 'amortization' are more common in the USA.

QUESTIONS
A. Find three words which can be used before assets to form a word pair. Then use
the word pairs to complete the sentences. You will need to use other words to
complete the third sentence.
1. current

2. fixed or tangible assets

3. intangible
4. The brand names ´Coca-Cola´ and ´Fanta’ are very valuable intangible assets.
5. Our fixed or tangible assets include the factory and office buildings.
1. Our current assets include:
2. cash (e.g.) money we have in the bank)
3. securities (e.g.) shares in another company)
4. Stock of finished goods (e.g.) products which are waiting to be sold)
5. debtors (e.g.) money owed to the company)
B. An auditor is talking to the finance manager of a company. Choose the best word
to fill each gap from the alternatives given below. Put a circle around the letter,
A, B or C, of the word you choose.
Firstly, the machinery in the factory is beginning to wear (1) out and therefore the (2) book value
shown in the balance sheet is probably too high. We recommend writing (3) down the value by 20%.
The total amount can then be written (4) off after five years. Secondly, some of the (5) finished
goods in the warehouse have a much lower (6) market value because they are last year’s models.
Finally, however, the value of some materials of the (7) unfinished goods on the production line can
be increased as many of the materials were purchased last year and prices have risen since then.

6. A down B off C out

7. A market B book C actual
8. A down B off C up
9. A down B off C up
 10.A unfinished B final C finished
11.A book B market C reality
12.A unfinished B incomplete C finished

C. Complete the assets table for a UK company with expressions from passage B
(Depreciation), and the relevant figures, using the following information:
18. Paradigm has goodwill, in the form of hundreds of satisfied customers, worth an estimated
£15,000. This is its only intangible asset.
19. It has investments of £6,000 in other companies.
20. It has raw materials, unfinished goods and finished goods together worth £3,500. It owns
equipment and machinery with a book value of £9,000.
21. It owns land with a book value of £31,000. It has £11,000 in its accounts at the bank.
22. It owns offices and factories with a book value of £94,000.
23. Various people and organizations, including customers, owe £7,500.

BALANCE SHEET AT 31 MARCH 2020

ASSETS
Cash $ 11,000.00
Securities $ 6,000.00
Stock $ 3,500.00
Debtors $ 7,500.00
Total Current Assets $ 28,000.00
Equipment $ 9,000.00
Buildings $ 94,000.00
Land $ 31,000.00
Total Fixed Assts (Book Value) $ 134,000.00
Goodwill $ 15,000.00
Total Intangible $ 15,000.00
Total Assets $ 177,000.00

D. TRUE / FALSE EXERCISE

Using the information in passage B (Depreciation) and in the table above, decide if
these statements about Paradigm's assets are true or false:
24. The figure for equipment and machinery is the price it was bought for, written
down by an amount for depreciation. T
25. The figure for equipment and machinery shows that it has been
written off completely. F
26. The figure for land and buildings is the exact amount they could definite be sold for . F
27. The figure for goodwill is an objective value of the customer base that a buyer
of the company would definitely agree to pay. F