Presented to the faculty of the

Department of Management Sciences

KASBIT University

SMCHS Campus

In the Fulfillment of the course

“Analysis of Financial Statement”

Bachelors in Business Administration

Submitted to

Sir Jehangir Tanveer

By

Hira Raza-15972
Ali Raza-15973
Nageen Shah-12635
 Table of Content
S. No. Particulars Page

ACKNOWLEDGMENT---------------------------------------------------------------------------

CHAPTER- BALANCE SHEET

Objectives…………………………………………………………………………………………
Balance Sheet- Defined………………………………………………………………………….

BALANCE SHEET CATEGORIES

Assets………………………………………………………………………………………………
Current Assets..………………….………………………………………………………………

Cash
Accounts Receivables
Marketable Securities
Inventories
Prepaid Expenses

Uncommon Terminologies……………………………………………………………………

Restricted Cash
Deferred Income Tax

Non-Current Assets…………………………………………………………………………….

Tangible

Land
Building
Machinery
Accumulated Depreciation

Intangible

Good will
Franchise
Patents
Trade Marks
Copy Rights

Liabilities………………………………………………………………………………………….
Current Liabilities….……………………………………………………………………………

Accounts Payable
Unearned Income
Accrued Expenses

Uncommon Terminologies…………………………………………………………………...

Promissory Notes
Accrues Revenue Share
Deferred Revenue

Non-Current
Liabilities………………………………………………………………………………………

Notes Payable
Bonds Payable
Loans
Credit Agreements

Uncommon Terminologies…………………………………………………………………

Deferred Taxes
Warranty Obligations

Shareholders Equity……………………………………………………………………………

Paid In Capital
Additional Capital
Common Stock
Preferred Stock
Treasury Stock
Outstanding Shares
Retained Earnings

Summary

OBJECTIVES:
 • By the end of this assignment our class mates will get an idea of what exactly a balance sheet is.

• Balance Sheet Equation.

• Why is it named a balance sheet?

• Details of the components of balance sheet?

• Why they are presented in a specific order on the balance sheet?

BALANCE SHEET-DEFINED:

• Very commonly known as Statement of Financial Position.

• It is an overview of what the company owns and owes at a point in time

• Assets= Liabilities + Equity

BALANCE SHEET
What we own What we owe

• What is owned is on the left

• and what is owed is on the right

BALANCE SHEET CATEGORIES:

BALANCE SHEET
What we own What we owe Current Liabilities are
the amounts due to be
paid to the creditors
Current Assets Current Liabilities with twelve months.

Cash and other

assets that are
expected to be
converted into
cash within a year

Non- Current
Non-Current Assets Non-Current Liabilities Liabilities are the
amounts owed that are
to be paid after the
period of one year.

These are the long-

term investments that
cannot be converted Book value of the
into cash quickly. share holders
Equity capital
CURRENT ASSETSS:

Cash Accounts Marketable Inventories Prepaid Expenses

rent Assets

rent Assets
rent Assets
ent Assets

Receivables Securities
t Assets

It is the most These are the It is an expenditure

Money due to be These are the balance of goods made in advance
liquid asset in hand. of the use of
received from short term Inventories differ service or goods.
 rendered to common stock , industry. It future benefits.

C
customers. bonds, preferred includes raw

Cur
shares etc. material, W.I.P,
F.G etc.

UNCOMMON TERMINOLOGIES:
• RESTRICTED CASH:
Money that is hold for some specific purpose and thus not available to company for immediate or general
business use.
• DEFERRED INCOME TAXES:
This reduces the taxable income in future. The overpayment/advance payment of tax becomes an asset to
the company as it reduces the amount of tax to be paid in future.
This is assumed as non-current asset for accounting purpose.
NON-CURRENT LIABILITIES:

Tangible Asset- Tangible Asset- Tangible Asset- Intangible Asset- Intangible Assets

Current Assets
Current Assets

Current Assets
Current Assets

Land Building Machinery Accumulated

Current Assets

Depreciation
It is the least liquid Building are Machinery is Good will
asset. These are the presented at cost recorded on its This is a practice of
physical facilities plus the cost of original cost allocating the cost Franchise
used in the permanent including delivery of building or Patents
operation of the improvements and and installation machinery over the Trade Mark
business. It is are depreciated charges at the time period benefited. It
shown as an over their of purchase in the is the depreciation Copy rights
acquisition cost estimated useful balance sheet. It is expense which is
and is not life. also depreciated accumulated in a
depreciated . over their separate account on
estimated useful the balance sheet.
life.

INTANGIBLE ASSETS- EXPLAINED

GOOD WILL:
Good will is a result of good customer relations and well-respected owner. Good will is subject to annual
impairment views. Impairment is recorded as loss on the income statement and as a reduction in the good
will amount. Impairment amount is charged when the companies identifies that the good will can no
longer demonstrate financial results that were expected from it at the time of purchase.
PATENTS:
Patents are the legal business rights to manufacture and sell an invention over a set period of time. Patents
are amortized. Amortization is the process of expensing the cost of an intangible asset over the period of
its projected life.

TRADE MARKS:
Trademarks are the intangible assets and are the legal rights to use a logo, symbol, name or phrase after a
brand is trademarked.

FRANCHISES:
It is the legal right to operate under a particular corporate name.
COPY RIGHTS:
Copy rights are the rights that the authors, painters, musicians, sculptors and other artists have in their
creation and expression. Copy right is granted equivalent to the life of the creator plus 70 years and its
cost is amortized over the period of expected years.

Copyrights
Leonardo da Vinci
Paris
1503-1506

LIABILITIES:

ACCOUNTS PAYABLE:
 Paid with in a
year for
material and
goods

Short Term Wages

Obligations Taxes Payable
Payable

Notes Payable

UNEARNED INCOME:

Subscription
Income

Income from
investments and Rent
other sources Bond Interest
Income
unrelated to
employment.

Interest from
Saving
Accounts

ACCRUED EXPENSE:
 These are the expenses that
a company is liable to pay in
the future for which goods
and services have already
been delivered but not yet
billed.

Bonuses, Salary
Also known as Accrued Cost of future customer
and wages
Liabilities. warranty payments
payable

Unpaid accrued interest

payable

UNCOMMON TERMINOLOGY- CURRENT LIABILITY:

PROMISORY NOTES:
It is a signed document containing a written promise to pay a stated sum to a specified person or the
bearer at a specified future date.

ACCRUED REVENUE SHARE:

 This is a current liability and represents the percentage of the revenue agreed that the company will pay to
the investor.
DEFERRED REVENUE:
These are the payments received by a company in advance of delivering its goods or performing its
services.
NON-CURRENT LIABILITY:

Non-Current / Long-term Liabilities

These indicates the Promissory notes due in If secured by a claim against

money a company owes periods greater than one real property, they are called
Notes Payable its financers or banks. year or longer are mortgage notes
They are payable classified as long term
beyond 12 months and liabilities
usually within 5 years.

A bond is a debt Example: corporate Bonds payable are long term

security created when bonds are debt liabilities and typically bonds
Bonds Payable one party lends money securities issued by mature in more than one year.
to another corporations and sold to
investors.

Company owes a third

Long-term Debts/ Loans party creditor that are Pensions
payable beyond 12 Postretirement benefits etc.
months

These are the loan Often the company does

commitments from a not intend to obtain
bank or insurance these loans but has In return of giving a credit
Credit Agreements company for future arranged the credit agreement the bank or the
loans. agreement just in case a insurance company obtains a
need arises for fee.
additional funds.

UNCOMMON TERMINOLOGIES- NON CURRENT LIABILITIES:

DEFERRED TAXES:
Tax that is payable in the future is termed as Deferred Taxes. Deferred tax liability arises when in
depreciating fixed assets, recognizing revenues and valuing inventories.
WARRANTY OBLIGATIONS:
Means all liabilities arising out of the repair, rework, replacement, or return of warranty in refund of the
purchase price of any business product.
Product warranties require the seller to correct any deficiencies in quantity, quality or performance of the
product or service for a specific period of time after the sale.
Warranty obligations are estimated in order to recognize the obligation at the balance sheet date and to
charge the expense to the period of the sale.
STOCK HOLDER’S EQUITY:
PAID IN CAPITAL & ADDITIONAL PAID IN CAPITAL

Additional Paid up
capital refers to only the
amount in excess of
stock’s par value.

Par Value= $
Full amount of cash or 10
other asset that Par Value may be $1
No. of shares=
shareholders have given 1000 Investors may be willing
a company in exchange to pay $ 3 per share to
for stock at par value. Paid in capital invest in the company.
= $ 10,000

Additional Paid up
capital represents the
extra $2 investors paid
to the company above
the original $1par value.

COMMON STOCK:
 Holders of common
stock have the
voting rights to elect
the board of
Directors.

Common stock
Common Stock Also
holders are the last
represents the known as
in line when it
ownership in a Ordinary
comes to liquidate
corporation. Stock
the company assets.

They are paid out

after creditors,
bondholders and
preferred share
holders.

PREFERRED STOCK:

Holders of preferred
stock do not have the
voting rights to elect
the board of Directors.

These can be
Preferred shares are They are paid put
redeemed at
ideal for risk bearing before the common
any time by
investors . share holders.
the issuer .

Preferred stocks have

the tendency to pay
higher and more
regular dividends than
the company’s
common stock.

TREASURY STOCK:
 These shares previously
were the outstanding
shares but after they are
reacquired , the y are no
longer included in
dividend distribution or
calculating EPS.

These are the Treasury

reacquired shares that These are to reduce the
shares do not
are bought back from outstanding stock in the
have voting
the shareholders by the open market.
rights.
issuing company.

To increase the market

value of the
outstanding shares and
elevate over all EPS,
the company reacquire
the shares.

OUTSTANDING SHARES:

Knowing the no. of

outstanding shares
helps the investors
find the total value of
the business.

They are
The no. of shares shown on The no. of
issued by any company’s outstanding share is
company is said to be balance sheet used to calculate
outstanding shares under the company’s market
and are held by all its heading capitalization as well
share olders. Capital as EPS.
Stock.

No. of outstanding
share is not static and
may fluctuate over
time.
RETAINED EARNINGS:
 This is the reserve money
which is available to the
company’s management for
reinvesting into the business.

It is the company’s Also called as It is the amount after

accumulated profit that Earning payments of all the
is held or retained for Surplus. dividends.
future use.

Retained earnings help

improve the financial
health of a company

THIS IS HOW A BALANCE SHEET LOOKS LIKE:

SUMMARY:
• It is a snapshot of a business assets- (what the business owns) and liabilities- (what the business
owes.)
• Provides and insight of debt funding availed by the organization.
• Net worth of the company.
• A balance sheet of an organization gives the reason to invest in a stock.
• It is so called because of the fact that the assets will equal the liabilities and shareholder’s equity
every time.
• It identifies the accumulated change in value since the inception of the firm.