TOTAL CHILD SCHOOL, PORT HARCOURTWEEK: 8 & 9
TOPIC: BALANCE SHEET
CLASS: JSS3
GENDER: MIXED
AVERAGE AGE: 12 YEARS
DURATION: 2 PERIODS (40min. for each period)
REFERENCE: WABP junior secondary business studies book 3 and
Classic business studies book 3
BEHAVIOURAL OBJECTIVES: By the end of the lesson, students should be able to:
PREVIOUS KNOWLEDGE: the students have been taught trial balance.
Biblical Objective: To present a true and fair view of a business’s financial position through an accurate balance sheet, promoting transparency and accountability.
Biblical Truth: God values honesty, order, and faithful stewardship in the reporting and management of assets and liabilities.
Bible Verse: “The integrity of the upright guides them, but the unfaithful are destroyed by their duplicity.” — Proverbs 11:3 (NIV)
STEP 1: BALANCE SHEET
A balance sheet is a statement of the assets and liabilities of a business at a particular date.
A balance sheet is a statement of the financial position of a business.
STEP 2: USES OF THE BALANCE SHEET
1. The balance sheet shows what the business owns (assets)
2. It shows what the business owes
3. It shows the current financial performance.
STEP 3: CONTENTS OF A BALANCE SHEET
1. CAPITAL: This is the amount of money used to start a particular business. Capital can also
be regarded as the owner’s investment in the business.
2. ASSETS: Assets are items acquired for use in the business.
Assets can be grouped into two broad headings:
a. FIXED ASSETS: These are assets that can last for a long period of time e.g land and
building, plant and machinery, motor van, generator, equipment, furniture and fittings,
premises etc.
b. CURRENT ASSETS: The assets of an organization that are constantly changing their form
and are circulating from cash to goods and back to cash again.
Examples of current assets are: stock of goods, cash in hand, cash at bank, debtors, payment in
advance.
3. LIABILITIES: These are the amount of debt that must be paid.
Liabilities are classified into:
a. CURRENT LIABILITIES: These are debts which a business must pay back within one year.
This type of liabilities is also known as short term liabilities. They are: creditors, overdraft,
Accrued expenses, short term loan.
b. LONG TERM LIABILITIES: These are debts which a business does not need to pay back
within a year. It takes a longer time to pay back a long-term liability.
Examples are bank loans and debenture.
ILLUSTRATION
Use the following to prepare a balance sheet for Ayodele’s store as at October,29, 2010.
N
Capital 11,500
Land and building 3,000
Furniture and fittings 2000
Net profit 500
Motor car 1000
Drawings 600
Creditors 600
Owing 400
Stock 3000
Debtors 1000
Bank 2,400
SOLUTION
N Capital 11,500 Add net profit 500 12,000 Less drawings 600 11,400 Current liabilities: Creditors 600 Owing 400 1000 12,400 | N Fixed assets: Land and building 3,000 Furniture and fittings 2,000 Motor car 1000 6,000 Current assets: Stock 3000 Debtors 1000 Bank 2,400 6,400 12,400
|
BALANCE SHEET AS AT October 29,2010
Accounting equation is
Assets = Capital + Liabilities
WORKING CAPITAL: This is the excess of the current assets over current liabilities i.e
Current assets – current liabilities
EVALUATION
ASSIGNMENT
Prepare a balance sheet of Danladi store as at March 28,2010 from the following information:
N
Net profit 3,600
Land and building 4,500
Equipment 7000
Cash 100
Creditors 3,600
Capital 5000
Overdraft 700
Debtors 500
Stock 800