1.

3 Prepare the SFP of a single proprietorship

*A Balance Sheet shows the financial position or condition of the company; thus, it
is also called "Statement of Financial Position".
*A typical balance sheet starts with a heading which consists of three lines. The
first line presents the name of the company; the second describes the title of the
report; and the third states the date of the report.
*Notice that the third line is worded "As of..." Unlike the other components of the
financial statements which cover a span of time ("For the period ended..."), the
balance sheet presents information as of a certain date (at a specific point in
time). In the above example, the contents of the balance sheet pertain to the
financial condition of the company on December 31, 2016.
*A balance sheet summarizes the assets, liabilities, and capital of a company.
Assets refer to properties owned and controlled by the company. Liabilities are
obligations to creditors, lenders, etc. And capital represents the portion left for
the owners of the business after all liabilities are paid. For detailed lessons
about assets, liabilities and capital, check out the Elements of Accounting.
*Assets and liabilities are classified as either current or non-current. Current
assets are properties that will be converted into cash within 12 months or within
the operating cycle of the business. Current liabilities are due within 12 months
or within the operating cycle. Non-current assets and non-current liabilities are
those that do not meet the above qualifications.
*"Total assets" and "total liabilities and capital" should always be equal.
*The capital amount, 147,100 for Strauss, Capital, was actually taken from the
Statement of Owner's Equity.
*The balance sheet may be presented in two forms: account form and report form. In
account form, assets are presented on the left side while liabilities and capital
are presented on the right. In report form, assets are presented first and then
followed by liabilities and capital. The example above is presented using the
report form.
*Good accounting form suggests that a single line is drawn every time an amount is
computed. It signifies that a mathematical operation has been completed. The "total
assets" and "total liabilities and capital" amounts are double-ruled.