Reading a Balance Sheet

PRESENTED BY- B.K.PANDA

DATE:-09/06/18
Contents
1. Financial reports
2.Income statement Vs Balance sheet
3.Balance sheet
4.Liabilities
5.Assets
What you see in a profit and loss
account (income statement)
Income Expenses
◦ Sales or revenue ◦ Wages and salaries
◦ Other Income ◦ Raw material expenses
◦ Manufacturing expenses
◦ Selling and distribution expenses
◦ Administrative expenses
◦ Etc.
What you see in a balance sheet…
Sources of Fund Uses of Fund
◦ Equity ◦ Building, Plant, Machinery
◦ Debt ◦ Land
◦ Inventory
◦ Cash
◦ Etc.
Another way to state the equation:

Uses of resources = Sources of resources

Definitions Assets & Liabilities
Assets are economic resources
controlled by an entity and whose cost
at the time of acquisition could be
objectively measured.
◦ Land, Building, Machinery
◦ Investments
◦ Cash, Inventory, etc.
Liabilities are obligations to outside
parties arising from events that have
already happened.
◦ Bank borrowings
◦ Debentures issued
◦ Wages payable
Owners’ Equity shows the amount the
owners have invested in the entity.
◦ Share Capital
◦ Reserves and Surpluses
Sources of Fund
Liabilities
Assets of a typical non-finance company
Fixed assets (you get benefit from these assets over a period exceeding
one year)
Current assets
Financial Investments
Assets
Assets
Unearned revenue
Unearned revenue is money received by an individual or company
for a service or product that has yet to be fulfilled. Unearned
revenue can be thought of as a "prepayment" for goods or services
that a person or company is expected to produce for the purchaser.
As a result of this prepayment, the seller has a liability equal to the
revenue earned until delivery of the good or service
Uncollected Revenue/ Accrued Revenue

Accrued revenue is an asset class for goods or services that have

been sold or completed but the associated revenue that has not yet
been billed to the customer. Accrued revenue – which may include
income that is due in arrears – is treated as an asset on the balance
sheet rather than a liability. This reporting is important to the
valuation of a company, particularly in the service industry where
billing typically occurs after the work or service is complete because
this asset class ensures all earned revenue is reported.
Doubtful debts
Doubtful debts are those debts which a business or
individual is unlikely to be able to collect. The reasons for
potential non-payment can include disputes over supply,
delivery, the condition of item or the appearance of
financial stress within a customer's operations
Bad Debt
Bad debts expense often refers to the loss that a company
experiences because it sold goods or provided services and did not
require immediate payment. The loss occurs when the customer
does not pay the amount owed. In other words, bad debts expense
is related to a company's current asset accounts receivable.
Thanks