Preparing a Balance Sheet



Preparing a Balance Sheet

A balance sheet is statement that represents the overall financial position of a business at given date. In preparing the balance sheet, the accountant obtains valuable information about your business, like the state of the debts, which must be recovered or the availability of money at the moment or in the near future (Jubb, Haswell & Smith 2005). In short, it is a simple and clear picture of the company assets and liabilities. A balance sheet represents how much a company is financed by the shareholders and how much it is financed by external funds or liabilities (Weygandt, Kieso & Kell 1996). This paper shows the preparation of balance sheet keeping in view changes taking place after the preparation of trail balance.

Problem for Module 3

The adjusted trail balance sets the basis for preparation of financial statements including income statement and balance sheet. The given trial balance represents the list of balances of Nybrostrand Company for the period ended 31st Dec 2011. The old and the new fields represent pre-adjustment and post-adjustment figures given in the module 2. The yellow rows represent the accounts which were impacted from the changes.

Nybrostrand Company

Trial Balance as on 31st Dec 2011

 

Old

New

 

Debit

Credit

Debit

Credit

 

$

$

$

$

Accounts payable

 

$ 67 000

 

$ 31 500

Accounts receivable

$ 24 500

 

$ 24 500

 

Cash

$ 16 700

 

$ 16 700

 

Common stock

 

$ 10 000

 

$ 10 000

Depreciation expense

$ 24 350

 

$ 24 350

 

Cost of goods sold

$ 254 000

 

$ 218 500

 

Equipment (net of depreciation)

$ 425 000

 

$ 425 000

 

Insurance

$ 1 400

 

$ 1 400

 

Inventory

$ 25 000

 

$ 60 500

 

Long-term debt

 

$ 145 000

 

$ 145 000

Marketing

$ 4 500

 

$ 4 500

 

Paid-in capital

 

$ 90 000

 

$ 90 000

Property taxes

$ 8 900

 

$ 8 900

 

Rent

$ 18 000

 

$ 18 000

 

Retained earnings

 

108550 

 

$ 144 050

Revenues

 

$ 456 000

 

$ 456 000

Salaries

$ 67 500

 

$ 67 500

 

Utilities

$ 6 700

 

$ 6 700

 

 

 

 

 

 

Total

$ 876 550

$ 876 550

$ 876 550

$ 876 550

The following table presents the pre-adjustment and post-adjustment income statements for the company. The income statement shows Sales, Cost of goods sold, Gross profit, Total Operating Expenses and Net income/ loss for the company (Jubb, Haswell & Smith 2005). Because of the change in the figure for inventory by $ 35,500, Cost of goods sold was impacted and accounts payable were also impacted (Spiceland 2009).

Nybrostrand Company

For the year ended 31st Dec2011

 

Old

 

New

 

 

$

$

$

$

Sales

 

$ 456 000

 

$ 456 000

less: cost of Goods sold

 

 

 

 

Merchandise inventory opening

 

 

 

 

Add: Purchases

 

 

 

 

Less merchandise inventory

 

 

 

 

Cost of goods sold

$ 254 000

 

$ 218 500

 

Gross profit

 

$ 202 000

 

$ 237 500

Less Operating Expenses

 

 

 

 

 

 

 

 

 

Salaries

$ 67 500

 

$ 67 500

 

Marketing

$ 4 500

 

$ 4 500

 

Depreciation:

$ 24 350

 

$ 24 350

 

Rent Expense

$ 18 000

 

$ 18 000

 

Utilities

$ 6 700

 

$ 6 700

 

Insurance

$ 1 400

 

$ 1 400

 

 

 

 

 

 

Total Operating Expenses

 

$ 122 450

$ 0

$ 122 450

Net operating income

 

$ 79 550

$ 0

$ 115 050

Less other expenses

 

 

 

 

Interest expenses

 

 

 

$ 0

Tax

 

$ 8 900

 

$ 8 900

Net income/ loss

 

$ 70 650

 

$ 106 150

Additional information for module 3

The company made a secondary offering of stock and raised an additional $250,000.

The company had already paid $24,000 in dividends before deciding on the offering.

The company now has cash to invest in a piece of raw land on which to build in the ...