1. Balance Sheet

   A balance sheet is one of the two most important financial statements that a business can make for themselves to determine their overall financial condition.

   Simply put, a balance sheet is a list of Assets, Liabilities and Net Worth of a business on a specific date in time.

   A well known formula to determine Net Worth is:

   ---

   Assets - Liabilities = Net Worth.

   ---

   Therefore if your business has assets of 100000 pounds and liabilities of 50000 pounds, your net worth would be: £100000 - £50000 = £50000

                 Major Balance Sheet Categories:
   -------------------------------------------------------------
                             EXAMPLE CO.
                           Balance Sheet
                           AS AT 31/12/95
   
   
   ASSETS                               LIABILITIES       
   --------------                       --------------
   Current Assets        100000         Current Liabilities     50000     
   
   Fixed Assets           50000         Long Term Liabilities   25000
                                        -------------------     -----
                                        Total Liabilities       75000
                                       
                                        Net Worth               75000
   ---------------       ------         --------------          -----
   Total Assets          150000         Total Liab & Net Worth 150000
   
   -------------------------------------------------------------
   

Description

• Current Assets: Assets that will be converted to cash within 1 year. These are normally assets that are used in the ordinary course of business, like accounts receivable (debtors) and stocks.

• Fixed Assets: Assets considered as long term assets. Assets not used in the ordinary course of business like land, building, equipment, furniture, vehicles, etc.

• Current Liabilities: Debts that are considered short term in nature; usually creditors that must be paid within 1 year.

• Long Term Liabilities: Debts that are due for payment more than 1 year from the statement's date.

• Net Worth or Shareholders Funds: Assets - liabilities = net worth.

• Profit and Loss Account

  The Profit and Loss Account is one of the two most important financial statements that a business can make to determine their financial condition, the other being the balance sheet.

  Simply put, the profit and loss account is list of income, expenses and the end result - profit or loss, over a specific period of time.

  There are many types of profit and loss accounts, depending upon the type of business you are in, but generally, one can usually find the following major categories when looking at a profit and loss account.

------------------------------------------------------------------------
                            Example Co.
                         Profit and Loss
                   For Period 1/1/95 - 31/12/95

           Sales                                250,000

           Cost Of Goods Sold                   180,000
                                                -------
           Gross Profit                          70,000

           Expenses                              40,000
                                                -------
           Profit or (Loss)                      30,000            

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