BE 601

Class 1 – Balance Sheet

Presented by: Michelle Lennox

Conrad School of Entrepreneurship and Business

Introduction
 Round table introduction
 Name

 Background

 Venture idea

 If you were to use one word to describe Accounting, what would it be?

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My Expectations
 Complete the pre-class work (readings/videos)

 Come to class, and send me a notice if you can’t make it

 Participate in class

 Do the quiz and assignments, don’t be afraid to ask questions

 Not expecting you to become CPAs after MBET, but do expect you to understand
the financial health of your company
 Have fun

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Your Expectations
 Please send me an email message after the class on
 Your expectations from this course, list any topics that you would like to be addressed

 Please rate your accounting knowledge between 1-5, where 1 being “what is accounting?” and 5
being “I can prepare financial statements with my eyes closed”

 Count for participation marks!

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Course Outline
 See Learn

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Learning Objectives

• Intro to accounting and understanding basic accounting terms

• What are the four basic financial statements?

• What is the Balance Sheet?

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 What is Accounting?

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 Accounting = Language of the business

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Financial Statements

• Balance Sheet (Today’s class)

• Income Statement (Class 2)

• Cash Flow Statement (Class 3)

• Statement of Shareholders’ equity

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Balance Sheet

Assets = Liabilities + Owner’s Equity

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Balance Sheet

Assets = Liabilities + Owner’s Equity

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Current Assets

• Assets that are expected to turn into cash within one year of the balance sheet date

• Current asset accounts are sorted by order of liquidity, most liquid asset shows on top

• Other examples:
• Office supplies

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Balance Sheet

Assets = Liabilities + Owner’s Equity

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Fixed Assets (Long-term assets)

• Any assets that are non-current are classified as long-term assets

• Fixed assets are recorded at book value (price when it was purchased/acquired)

• Property, plant and equipment will depreciate over the useful life of the asset

Property, plant and equipment 30,000

Accumulated depreciation (10,000)
Property, plant and equipment (Net) 20,000

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Goodwill
 Goodwill is recorded when:
 A business is purchased

 AND the purchase price > fair value of net identifiable assets

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Balance Sheet

Assets = Liabilities + Owner’s Equity

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Current Liabilities

• Liabilities that are due within one year period

• Other examples:
• Wages payable
• Short-term debt
• Taxes payable

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Balance Sheet

Assets = Liabilities + Owner’s Equity

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Long-term Liabilities

• Liabilities that are due beyond one year period

• Other examples:
• Long-term debt
• Bonds payable

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Balance Sheet

Assets = Liabilities + Owner’s Equity

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Owner’s Equity

• Retained earnings are the profits or losses the company has earned to date, less dividends paid to shareholders

• Other examples:
• Preferred Shares

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Permanent accounts vs temporary accounts

Balance sheet consist of permanent accounts

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Debit vs Credit

Debit = Left, and Credit = Right

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New MBET Inc.
 You are the founder of New MBET Inc. and today is the first day of operation.

 The company is currently not generating revenue. Even though you have a
wonderful product, investors are not ready to invest in your company without any
revenue.

 You decided to bootstrap your start-up with your personal savings: $100,000 cash
in exchange for Common Shares in MBET Inc. How should this be recorded?
What does MBET Inc’s Balance Sheet look like?

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New MBET Inc. (Con’t)

Assets Liabilities

Owner’s Equity

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New MBET Inc. (Con’t)
 You saw a piece of land on sale and you bought it for $40,000 in cash

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New MBET Inc. (Con’t)

Assets Liabilities

Owner’s Equity

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New MBET Inc. (Con’t)
 Bought $500 of office supplies to be used for business operation on account.

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New MBET Inc. (Con’t)

Assets Liabilities

Owner’s Equity

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New MBET Inc. (Con’t)
 Went to the bank and took a bank loan of $50,000 that is due in 5 years

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New MBET Inc. (Con’t)

Assets Liabilities

Owner’s Equity

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New MBET Inc. (Con’t)
 Your friend wanted to chip in and gave you $50,000 in exchange for 10,000
preferred shares

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New MBET Inc. (Con’t)

Assets Liabilities

Owner’s Equity

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 What’s one take away you have from today’s
class?

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