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Balance Sheet (Assets (Depreciation (Allocation of a cost of an assets…
Balance Sheet
Assets
Measured at costs but can be revalued
Non Current Assets
Accounts Receivable
Doubtful debts impact the accounts receivable
Depreciation
Allocation of a cost of an assets over its useful life
Depreciation becomes an expense to the business
Inventory
Lower of cost and net realizable value rule
Must be recorded at cost value or written down to its net realisable value
Limitations
Inflation may be ignored
Historical Data
Alternative measures
Equity
Capital amount that funds assets
Profit - losses
Initial contributions + further contributions - owner drawings
Should balance at all time
Assets - liabilities = owners equity
Liabilities + Equity = Assets
Formats
T Format
Small businesses use it
Assets on the left
Liabilities and equity on the right
Narrative Format
More complex
Companies with public accountability use them
Assets come 1st
Current assets 1st
non current assets come 2nd
Liabilities come 2nd
current liabilities 1st
non current liabilities 2nd
Net assets come 3rd
(assets - liabilities)
Equity comes 4th