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STATEMENT OF FINANCIAL POSITION:

The financial statement showing the financial

position of an enterprise by summarizing its assets,
liabilities, and owners’ equity at a point in time. It is
also called statement of financial position.
BALANCE SHEET:
CRYSTAL AUTO WASH
Balance Sheet
September 30, 2007
ASSETS LIABILITIES & OWNERS’ EQUITY
CURRENT ASSETS LIABILITIES
Cash 9,200 Notes Payable 29000
Accounts Receivable 800 Accounts Payable 14000
Supplies 400 Salaries Payable 3000
FIXED ASSETS Total Liabilities0. 46000
Land 68000 OWNERS’ EQUITY

Buildings 52000 Capital Stock 100000

Equipment 65000 Retained Earning 49400
Total Assets 195,400 Total 195,400
WHY CALLED BALANCE SHEET:
A fundamental characteristic of every statement of
financial position is that the total for assets always
equals the total of liabilities plus owners’ equity.
This agreement or balance of total assets with the
total of liabilities and owners’ equity is the reason
for calling this financial statement a “balance
sheet”.

(Accounting Equation)
Assets = Liabilities + Owners’ Equity
HEADING:

The Heading communicates three things:

1. Name of the business.

2. Name of financial statement.
3. The date.
ASSETS:
“Economic resources owned by an entity”.

Resources that are owned by a business and are expected to

benefit in future operations. In most cases, the benefit to
future operations comes in the form of positive future cash
flows. The positive future cash flows may come directly as
the asset is converted into cash (collection of a receivable) or
indirectly as the asset is used in operating the business to
create other assets that result in positive future cash flows.
CURRENT ASSETS:

The assets that are to be used within a year or that

are expected to be used in a year are called current
assets.

Cash, Notes receivable in near future, accounts

receivable and supplies are the example of current
assets.
FIXED ASSETS:

The assets that are to be used more than a year or

that are expected to be used within five or more
years are called fixed assets.

Land, building and office equipment etc are the

example of current assets.
LIABILITIES:

Debts or obligations of an entity that resulted from

past transactions. They represent the claims of
creditors on the enterprise’s assets.

Notes payable, accounts payable and salaries

payable are the example of current assets.
CURRENT LIABILITIES:
Current liabilities are obligations that must be paid
within one year or within the operating cycle,
whichever is longer. Another requirement for
classification as a current liability is the expectation
that the debt will be paid from current assets.

Accounts payable, Notes payable, salaries payable etc

are the example of current assets.
LONG-TERM LIABILITIES:

Long-term obligations arise from major

expenditures, such as attainments of plant assets,
the purchase of another company, or refinancing
an existing obligations that is about to mature.
Thus transactions involving long-term liabilities
are relatively few in number but often involve large
dollar amounts.
ESTIMATED LIABILITIES:

The term estimated liabilities refers to liabilities

that appear in financial statements at estimated
dollar amounts. Estimated liabilities involve some
degree of uncertainty. However, the liabilities are
known to exist and the uncertainty as to dollar
amount is not so great as to prevent the company
from making reasonable estimate and recording
the liability.
OWNERS’ EQUITY:

Owners’ equity represents the owners’ claims on

the assets of the business. Because liabilities or
creditors’ claims have legal priority over those of
the owners, owners’ equity is a residual amount.
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