Balance Sheet And Its Liabilities Side( Part 1 of 3)

June 3rd, 2006 Comments off
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WHAT IS A BALANCE SHEET?

A Balance Sheet is a snapshot of the financial position of an entity.

This snapshot is at a point of time.

Say, as at 7 May 2007, you look at Company A’s balance sheet, it reflects the financial position as at that day. After that day, the financial position company A  can change to a better or worse situation.

Also, remember that in the Balance Sheet, we have the three (3) key components:

Assets= LIABILITIES + Owners Equity

( Refer to my illustration for the Dual Aspect Concept)

 

DEFINE WHAT ARE THE CHARACTERISTIC OF LIABILITIES?

 

  • Future transfer or use of assets
  • The entity has no discretion to avoid it
  • Transaction already happened

 

WHAT ARE THE MAJOR COMPONENTS OF THE TOTAL LIABILITIES?

Comprises:

1. Current Liabilities and

2. Long Term Liabilities

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Financial Accounting

 
 

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