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Table 6 Columnar form of balance sheetBalance sheet as at................. £000 £000 £000 ASSETS EMPLOYED FIXED ASSETS Cost Deprec. Net Freehold premises 4000 1000 3000 Leasehold premises 1000 370 630 Plant and machinery 5000 2355 2645
Investments
CURRENT ASSETS Stock (inventories) 5500 Debtors and prepayments 1500 Marketable (liquid) securities 500 Bank balance and cash 100 Deduct CURRENT LIABILITIES Creditors 1754 Tax and prepayments in coming year 500 Bank overdraft 451
NET CURRENT ASSETS 3040 NET ASSETS EMPLOYED 4560 FINANCED BY: SHARE CAPITAL Ordinary shares 5300 Preference shares 2100 RESERVES 2500 LOAN CAPITAL 2500
The way in which the balance sheet in Table 5 is presented is called the T form. It is still in use but most large businesses now use the columnar form, as shown in Table 6. This has the major advantage of distinguishing clearly between the sources and use of funds and it is generally accepted as an easier form to interpret. The balance sheet shows the position of a business at a given moment but it does not tell us how the business reached that position, the level of its sales and how the profit made had been divided between the various parties with a claim to it. For this information we need two other financial statements: the profit and loss account and the funds flow statement.
2.Comprehension check. Working in pairs, answer the questions.
a) What is a balance sheet? b) Why is it necessary for a business to provide a balance sheet for report? c) What is the difference between the columnar form and the T form? d) What are two other financial statements? 3.Read the text again. Find and write down words in the text that mean the same as the following words and definitions. They are in the same order as they appear in the text.
4.Working in pairs, compare the net profit of Baines’ Nursery after tax with the amount of money they invested in the business. Assuming banks are paying 10 per cent interest on deposit accounts should the Baines be pleased with the results of their first year’s trading? Explain your answer.
5.Look at this example of a balance sheet. Replace the underlined words or phrases with a word or phrase from the box with a similar meaning.
bank overdraft land preference shares tax capital reserves ordinary shares share capital working capital creditors plant stock
BOGUS INDUSTRIES plc Balance sheet as at 31 December 2004 ASSETS $000 Fixed assets (1) Property 420 Buildings 180 (2) Equipment and machinery 100 Date: 2015-12-11; view: 1187
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