Fundamentals of accounting
Fundamentals of accounting

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Fundamentals of accounting

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

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Answer

Edgar Edwards Enterprises

Balance Sheet as at 6 July 20X2

Table 2 Completion of a balance sheet

£
Non-current assets
Furniture400
ComputerTotal  600
1,000
Current assets
BankTotal  9,150
Total assetsTotal 10,150
£
Capital4,950
Non-current liabilities
Bank loan5,000
Current liabilities
Payables (Pearl Ltd)Total  200
Total capital and liabilitiesTotal 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.

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