High value stuff at the top as fixed assets, remember to show cost price, accumulated depreciation and then value after depreciation, then go to current assets, bank if not overdrawn, cash if they have any, debtors and such like. What you have there are two parts of the balance sheet that show positive value, the idea being that if a prospective buyer looks at the balance sheet, they see high value assets first. Next you're on to the lowest value liabilities, current liabilities might be creditors, vat, hmrc overdraft. Next any high value liabilities like long term loans. So you have the most impressive stuff at the top leading to the least impressive at the bottom. Then of course show how it's funded.
HTH
-- Edited by Rhianrach on Saturday 3rd of March 2012 06:18:25 PM
I am currently studying Level 1 Basic Bookkeeping and am really really struggling to get my head around balance sheets!
When I am looking at an example balance sheet I can understand it but when I go to draw one up myself I just cannot seem to memorise what goes where...
whenever you are learning any new pro forma for the first time one way to master it is to write every element on an index card then number the other side.
put the cards in the order that you think they should go and see if you have anything out of sequence.
keep doing it until you can get it right every time.
With balance sheets it also doesn't help that there are multiple formats that can be used.
Just get used to keeping the following togeter
Assets (non current then current)
Liabilities (non current then current)
Equity (share capital always comes first)
You will see balance sheets with Liabilities before equity and vice versa. Both are quite valid formats.
For currrent assets note that they are shown in the reverse sequence of which they can most easily be turned into cash (so inventory is normally at the top and cash/bank at the bottom).
Get used to thinking in double entry terms when looking at the balance sheet. For example, everything that goes into the top half (Assets) must somehow have an equivalent in the bottom half (Equity & liabilities... In either order).
Years in and it still gives me a thrill when balance sheets do. How sad it that!
Just thought, when you number your index cards order then 10, 20, 30, 40, etc. as the further you get into your studied the more that will be creeping into your balance sheets (Goodwill, Associates, Preference shares, etc.).
Anyway, trust me when I say that memorising the balance sheet (and the Profit and Loss, and Cashflow statement, etc. etc.) will all come to you despite how you are feeling about it now. We've all been there, we all came through and so will you.
Hope that helps a little, sure that others will be rushing to your rescue with their methods of memorising things imminently.
kind regards,
Shaun.
P.S. I also have an A4 day per page diary where every day I fill out a different pro forma from memory to make sure that nothing has slipped. Tends to be things like cashflow statements and tax computations nowadays but the principle is the same and it's not a bad idea to get into doing that as it's five mins a day that means that when it comes to exams it's one less thing that you have to think about and worry that you've forgotten something.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I think that we're all taught a little differently.
For instance, you show cost price, accumulated depreciation and then value after depreciation whereas to me the balance sheet would simply be the current balance with those bits relegated to the workings.
Actually, on the bank as well I was actually taught to show an overdrawn balance as a negative asset rather than a liability.
I remember a couple of weeks ago having a debate with MarkS on here as I gave an example balance sheet in an answer that was not in a format that he was familiar with (Assets, equity then liabilities rather than Assets, Liabilities then equity which is the format that he had always used).
This is definitely one of those industries where put ten accountants in a room and you'll get ten completely correct answers that look nothing like each other!
Of course, whichever way that you are taught is the correct one. You just have to hope that the marker of your exam paper is an accountant rather than some bod off the street and given an example answer and told that the exam answers have to match it exactly.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Louise, you've gone Quackers... lol. sorry. I'm sure that there wasn't a picture of a duck there when I first posted. Whats the significance?
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Sean... I have duly noted your suggestion and will be off to the shops tomorrow to buy a stock of index cards. Excellent suggested method of numbering them too (as you say there will be more to come!)
Steve - I love the way in which you suggest I think of the items when deciding where to place them in terms of prioritisation in terms of impressiveness.
It is very daunting at first but I am determined to get through
I am currently an accounts assistant using Quickbooks and really want to learn the manual way so I fully understand what is going on in the background of Quickbooks.
I am sure I will be bugging you all lots more in the future as I make my way through the course
This picture was taken on holiday, in Italy - The same duck (well I reckon it was the same one, ha ha) used to come and see me everyday.
I called the duck Derek after an accountant I used to work for who sadly passed away a couple of years ago. It was he who inspired me into the world of numbers so I felt it rather fitting to have Derek the Duck as my avatar
I'm studying level 1 using Kaplan's materials and no where does it discuss the order that things should appear on the balance sheet. Based on this I'd assume that the order is unlikely to be tested as part of the level 1 sylabus (of course knowing the order will be vital later on). Please tell me if I'm wrong.
Thirty something, when you say " I just cannot seem to memorise what goes where" are you talking about the order that things should appear in the balance sheet or which items appear on the credit side and which are on the debit side?
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.................just an ICB student, at the moment.
I think that I know where the confussion is coming from here.
The ICB text produced by Kaplan is for beginner / intermediate that covers levels I & II manual rather than just level I.
You're completely correct in that the level I syllybus doesn't seem to cover the balance sheet... To my mind I think that it should as unless you understand where everything is going to end up how do you know what you're doing (#1). But I digress. fact is that it doesn't.
Anyway, the study text for beginner / intermediate does cover basic financial statements (see page 348 to 350 - ISBN of the book that I'm looking at is 978-1-84710-714-5) although to be honest in two pages it covers them in so little depth that it seems hardly worth the paper it's written on.
At level II you will be expected to produce a profit and loss account and balance sheet as the final stage of the exam.
Personal opinion is that Louise has got it right to front load this even if not needed immediately as its fundamental to everything from here forwards, including an understanding of the answers being given at level I.
Right, I'll leave it there before getting on my high horse about ethics being noticable by their absence from the ICB syllabus.
Talk later,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I'm studying level 1 using Kaplan's materials and no where does it discuss the order that things should appear on the balance sheet. Based on this I'd assume that the order is unlikely to be tested as part of the level 1 sylabus (of course knowing the order will be vital later on). Please tell me if I'm wrong.
Thirty something, when you say " I just cannot seem to memorise what goes where" are you talking about the order that things should appear in the balance sheet or which items appear on the credit side and which are on the debit side?
Hi Ray
Nice to speak to another beginner student
I am studying with Ideal Schools who cover balance sheets within the first section of level 1. I have moved forward from here but keep coming back to the balance sheet section as it is vital I get my head around this before moving on as this is an area on which I always seem to have a mental block!
I have been struggling to memorise the order in which items should appear vertically.
Sean and Steve have suggested excellent ways to overcome this which I am putting into practice today (Sean I now have a stock of 200 index cards infront of me ready to go) and cannot wait for that enjoyable moment when the penny starts to drop!
