Task Sheet 15

UNDERSTANDING THE BALANCE SHEET

Use
Use the
the information
information given
given to
to fill
fill in
in the
the cells
cells in
in green
green with
with the
the correct
correct value.
value. A
AY Y means
means you have the right answer.
Cells
Cells in
in blue
blue will
will calculate
calculate automatically.
automatically. IfIf you
you need
need aa clue
clue put
put your
your pointer
pointer on
on the
the question
question mark.
mark. The
The exclamation
exclamation
mark,
mark, the question mark
mark and
and cells
cells with
with red
red triangles
triangles give
give you
you help
help if you need it.

Date 3/1/1989
Gordon Pepper obtains a long term bank loan of £8,000 which he will start to pay back in 3 years time.
He also borrows £2000 from his brother that he must repay in 3 months! All money is put in the bank.

Assets £ Liabilities £ £
Cash in bank N Bank loan N Current Assets N Current Ratio #DIV/0!
Family loan N Current Liabilities N Acid Test Ratio #DIV/0!
Total Assets £0 N Total Liabilities £0 N Working Capital £0 N

? !

Date 4/1/1989
He uses £1,000 from the cash in the bank to buy printing equipment.
Assets £ Liabilities £ £
Cash in bank N Bank loan N Current Assets N Current Ratio #DIV/0!
Printing equip N Family loan N Current Liabilities N Acid Test Ratio #DIV/0!
Total Assets £0 N Total Liabilities £0 N Working Capital £0 N

Date 5/1/1989
He collects stocks of paper and ink, worth £1,250 which he will pay for in 90 days
Assets Liabilities
Cash in bank N Bank loan N Current Assets N Current Ratio #DIV/0!
Printing equip N Family loan N Current Liabilities N Acid Test Ratio #DIV/0!
Stock N Creditors N Working Capital £0 N
Total Assets £0 N Total Liabilities £0 N

? !

Date 6/1/1989
His first job uses £750 of stock and pays £2,500, which goes into the bank. (Profit = £2,500 - £750)
Assets Liabilities
Cash in bank N Bank loan N Current Assets N Current Ratio #DIV/0!
Printing equip N Family loan N Current Liabilities N Acid Test Ratio #DIV/0!
Stock N Creditors N Working Capital £0 N
Profit N
Total Assets £0 N Total Liabilities £0 N

Date 7/1/1989
Gordon pays his brother in full from the cash in the bank, and pays his creditors in full
Assets Liabilities
Cash in bank N Bank loan N Current Assets N
Printing equip N Family loan Y Current Liabilities Y
Stock N Creditors Y Working Capital £0 N
Profit N
Total Assets £0 N Total Liabilities £0 N
Date 9/1/1989
Gordon takes £600 from the profit, as wages. He buys £3000 more stock on 90 days credit
He buys a van for £4500 cash
Fixed Assets Liabilities
Printing equip N Bank loan N Current Assets N Current Ratio #DIV/0!
Van N Creditors N Current Liabilities N Acid Test Ratio #DIV/0!
Current Assets Profit N Working Capital £0 N
Cash N
Stock N
Total Assets £0 N Total Liabilities £0 N

Date 10/1/1989
Gordon does a job using £400 of stock. He will be paid £4,000 in 8 weeks time
Fixed Assets Current Liabilities
Printing equip N Creditors N Current Assets N Current Ratio N
Van N Current Liabilities N Acid Test Ratio N
Current Assets Long term Liabilities Working Capital £0 N
Cash N Profit N
Stock N Bank loan N
Debtors N
Total Assets £0 N Total Liabilities £0 N

Date 12/1/1989
He is paid in full for the above job, and spends £3750 in cash on new printing equipment
He pays off his creditors, but takes another £10000 worth of stock on credit
Fixed Assets Current Liabilities
Printing equip N Creditors N Current Assets N Current Ratio N
Van N Current Liabilities N Acid Test Ratio 0.04
Current Assets Long term Liabilities Working Capital N
Cash N Profit N
Stock N Bank loan N
Debtors Y
Total Assets £0 N Total Liabilities £0 N

Date 2/1/1990
Gordon becomes a private limited company and sells £150,000 of shares to his family
He puts the share capital into the bank
Fixed Assets Current Liabilities
Printing equip N Creditors N Current Assets N Current Ratio N
Van N Current Liabilities N Acid Test Ratio N
Current Assets Long term Liabilities Working Capital N
Cash N Profit N
Stock N Bank loan N
Debtors Y Share capital N
Total Assets £0 N Total Liabilities £0 N
Date 3/1/1990
Gordon uses cash to buy an office for £80,000. He pays his creditors half of what he owes.
His recent work has made him profits of £4000, £1000 of which he is still owed due to late payment
Of the £3000 paid to him, half has gone into the bank and half is kept at the office
Fixed Assets Current Liabilities
Printing equip N Creditors N Current Assets N Current Ratio N
Van N Current Liabilities N Acid Test Ratio N
Premises N Working Capital N
Current Assets Long term Liabilities
Cash at firm N Profit N
Cash at bank N Bank loan N
Stock N Share capital N
Debtors N
Total Assets £0 N Total Liabilities £0 N

Use the data above to complete the Balance Sheet below (which is in a different format)
Pepper Publishing at 1st March 1990
Fixed Assets
Capital Equipment N
Vehicles N
Premises N
Total N
Current Assets
Cash at firm N
Cash at bank N
Stock N
This
This way way ofof presenting
presenting the
the
Debtors N
balance
balance sheet has exactly
Total N
the
the same
same information
information as
as the
the
Deduct one
one for for Pepper
Pepper above.
above.
Current Liabilities ItIt balances
balances because
because the Net
Net
Creditors N Assets
Assets of of the
the firm
firm must
must
Net Current Assets N belong
belong to to to
to the
the owners
owners of
of
the
the firm
firm -- in
in the
the form
form of
of
Total Assets less Current Liabilities N retained
retained profit and the funds
Bank Loan N of
of shareholders.
Net Assets N
Financed by:
Retained Profit N
Shareholder Funds N
Total N

Use the space below to explain how Pepper would use the current ratio and the acid test
ratio to work out the firm's liquidity position (how easily it can pay its short term debts).