4.4.1 Preparing a balance sheet
In your final activity for Week 4 you will prepare a balance sheet in the vertical format for Edgar Edwards Enterprises at the end of the day on 6 July 20X2.
Activity 3 Preparing a balance sheet in a conventional format
Complete the balance sheet below. Your answer should have the correct figures for the individual asset, liability and capital balances as well as the correct figures for total assets and total capital and liabilities. (Non-current assets refer to assets that are typically held in a business for longer than a year. Current assets are assets that are typically held for less than a year. Likewise non-current liabilities refer to liabilities that are typically held in a business for longer than a year. Current liabilities are liabilities that are typically held for less than a year.)
Edgar Edwards Enterprises
Balance Sheet as at 6 July 20X2
Table 2 Completion of a balance sheet
Answer
Edgar Edwards Enterprises
Balance Sheet as at 6 July 20X2
| £ | |
| Non-current assets | |
| Furniture | 400 |
| Computer | Total 600 |
| 1,000 | |
| Current assets | |
| Bank | Total 9,150 |
| Total assets | Total 10,150 |
| £ | |
| Capital | 4,950 |
| Non-current liabilities | |
| Bank loan | 5,000 |
| Current liabilities | |
| Payables (Pearl Ltd) | Total 200 |
| Total capital and liabilities | Total 10,150 |
The capital of a business is the value of the investment in the business by the owner(s). As you learned in Activity 3 in Week 1, if a business makes a profit, the value of the investment by the owner (capital) increases. The best way to understand how this works is to look at the effect of profit on the accounting equation.