FA30 - Merchandiser's Financial Statements - Balance Sheet
Summary
TLDRIn this instructional video, the presenter guides viewers through the creation of a balance sheet for Julie's Plumbing Supplies as of March 31, 2024. They begin by listing assets, including cash, receivables, inventory, and equipment, and then move on to liabilities such as accounts payable, wages payable, and a bank loan. Shareholders' equity is derived from the statement of changes in equity, with common shares and retained earnings totaling the equity amount. The presenter emphasizes the importance of accuracy, demonstrates how to correct mistakes, and concludes with a balanced sheet, highlighting the process's educational value.
Takeaways
- 📋 The script is a tutorial on creating a balance sheet for Julie's Plumbing Supplies as of March 31, 2024.
- 💼 The balance sheet is structured with assets on the left, liabilities on the right, and shareholders' equity listed later on the right.
- 💰 The company's most current asset is cash, amounting to $24,000.
- 📈 Accounts receivable are calculated by subtracting the allowance for doubtful accounts from the total receivables, resulting in a net of $15,000.
- 🔄 Prepaid insurance, inventory, and equipment (net of depreciation) are included in the current and long-term asset calculations.
- 🧮 Total current assets are calculated to be $99,000, and total assets are $214,000 after adding the net equipment value.
- 📉 Liabilities include accounts payable, wages payable, unearned revenues, and a long-term bank loan, totaling $111,000.
- 🏦 The long-term liability is a bank loan payable amounting to $84,000.
- 📊 Shareholders' equity is derived from the statement of changes in equity, with common shares and retained earnings totaling $93,000.
- 🔄 There was a moment of doubt regarding the total assets and liabilities summing up to $204,000, but it was quickly corrected.
- 👍 The video encourages viewers to like and subscribe if they find the tutorial helpful.
Q & A
What is the purpose of the balance sheet being discussed in the script?
-The purpose of the balance sheet is to provide a snapshot of Julie's Plumbing Supplies' financial position as of March 31st, 2024, by listing the company's assets, liabilities, and shareholders' equity.
What is the total amount of cash that Julie's Plumbing Supplies had according to the script?
-Julie's Plumbing Supplies had a total cash amount of twenty-four thousand dollars.
How does the script handle accounts receivable and the allowance for doubtful accounts?
-The script calculates net receivables by subtracting the allowance for doubtful accounts ($3,000) from the total accounts receivable ($18,000), resulting in a net of $15,000.
What is the total of current assets calculated in the script?
-The total of current assets is calculated by adding cash ($24,000), net receivables ($15,000), inventory ($54,000), and prepaid insurance ($6,000), which equals $99,000.
What is the process for determining the net value of equipment in the script?
-The net value of equipment is determined by subtracting the accumulated depreciation ($20,000) from the gross value of equipment ($125,000), resulting in a net value of $105,000.
What is the total value of assets listed in the balance sheet according to the script?
-The total value of assets is the sum of current assets ($99,000) and net equipment ($105,000), which equals $204,000.
What are the current liabilities listed in the script for Julie's Plumbing Supplies?
-The current liabilities listed include accounts payable ($15,000), wages payable ($7,000), and unearned revenues ($5,000), totaling $27,000.
What is the total amount of long-term liabilities mentioned in the script?
-The total amount of long-term liabilities is a bank loan payable, which is $84,000.
How is the shareholders' equity calculated in the script?
-Shareholders' equity is calculated by considering the common shares ($1,000) and retained earnings ($92,000), totaling $93,000.
What is the grand total of liabilities and shareholders' equity in the balance sheet as per the script?
-The grand total of liabilities and shareholders' equity is the sum of total liabilities ($111,000) and total shareholders' equity ($93,000), which equals $204,000.
What mistake was made in the script regarding the total calculation and how was it corrected?
-Initially, the script incorrectly calculated the total liabilities and shareholders' equity as $200,000. The mistake was corrected by recalculating the sum of $111,000 (total liabilities) and $93,000 (total shareholders' equity), which correctly equals $204,000.
Outlines
📊 Preparing the Balance Sheet for Julie's Plumbing Supplies
The speaker begins by outlining the process of creating a balance sheet for Julie's Plumbing Supplies as of March 31, 2024. They emphasize the importance of structuring the balance sheet with assets on the left, liabilities on the right, and shareholders' equity in between. The speaker then delves into the specifics of the current assets, starting with cash of $24,000, followed by the explanation of accounts receivable and the allowance for doubtful accounts, which results in net receivables of $15,000. Inventory and prepaid insurance are also included as current assets. The calculation for net receivables is shown, and the total current assets are summed up to be $109,000. The speaker then moves on to long-term assets, specifically equipment and its accumulated depreciation, resulting in a net equipment value of $105,000. The total assets are calculated to be $214,000. The process is methodical, with an emphasis on accuracy and clarity.
🧾 Analyzing Liabilities and Shareholders' Equity in the Balance Sheet
In the second paragraph, the speaker focuses on the liabilities and shareholders' equity sections of the balance sheet. They start by identifying current liabilities, which include accounts payable, wages payable, and unearned revenues, totaling $27,000. A unique item, unearned revenues, is explained as a liability for services paid for in advance but not yet delivered. The speaker then discusses the long-term liability, which is a bank loan payable amounting to $84,000. The total liabilities are calculated to be $111,000. Moving on to shareholders' equity, the speaker references the statement of changes in equity, identifying common shares and retained earnings as the components, which sum up to $93,000. A minor error is made in the calculation, which is quickly corrected, affirming that the total liabilities and shareholders' equity equal the total assets, $204,000. The speaker concludes by emphasizing the importance of accuracy in financial statements and encourages viewers to review previous chapters for a deeper understanding.
Mindmap
Keywords
💡Balance Sheet
💡Assets
💡Liabilities
💡Shareholders' Equity
💡Current Assets
💡Net Receivables
💡Accumulated Depreciation
💡Unearned Revenues
💡Retained Earnings
💡Trial Balance
💡Allowance for Doubtful Accounts
Highlights
Introduction to creating a balance sheet for Julie's Plumbing Supplies.
Explanation of the balance sheet structure with assets on the left and liabilities and shareholders' equity on the right.
Determination of the date for the balance sheet as March 31st, 2024.
Listing of assets starting with the most current, such as cash at twenty-four thousand dollars.
Introduction of receivables and the concept of allowance for doubtful accounts.
Calculation of net receivables by subtracting the allowance from the total receivables.
Inclusion of inventory and prepaid insurance as current assets.
Summation of total current assets to reach an interesting number.
Identification of equipment and accumulated depreciation as long-term assets.
Calculation of net equipment by subtracting accumulated depreciation from the equipment cost.
Listing of total assets and the process of double-underline and dollar sign notation.
Discussion of liabilities including accounts payable, wages payable, and unearned revenues.
Explanation of unearned revenues as a liability despite being labeled as revenue.
Calculation of total current liabilities and identification of the bank loan as a long-term liability.
Summation of total liabilities and the importance of checking for accuracy.
Derivation of shareholders' equity from the statement of changes in equity.
Listing of common shares and retained earnings to calculate total shareholders' equity.
Final verification of the balance sheet's totals for assets, liabilities, and shareholders' equity.
Correction of a mistake in the calculation and the importance of accuracy in financial statements.
Completion of the balance sheet and the satisfaction of having a balanced statement.
Encouragement for viewers to engage with the content and subscribe to the channel.
Transcripts
okay we have been working through this
Julie's plumbing supplies problem we've
done the income statement we've done the
statement of changes in equity and now
it's time to work on the balance sheet
so let's get started with the title as
always with a balance sheet or any
statement it's gonna be a three liner
I'm a I've left sort of wider room for
my balance sheet so I'm gonna sort of
leave more width
we've got Julie's plumbing whoa
Plumbing Supplies we are preparing a
balance sheet and balance sheets just
get dated and the date here is March
31st 2024 we're gonna list assets on the
Left we're gonna list liabilities on the
right and when we get to it will list
shareholders equity somewhere down the
page on the right so looking over to our
trial balance here we basically have all
the stuff we need for assets and
liabilities right here and for
shareholders equity it comes from the
statement of changes in equity so assets
and liabilities are what we're worried
about let's start with the most current
and the most current is cash and we'll
begin with cash our company's cash was
twenty four thousand bucks
now next we have receivables and this is
interesting
we hadn't done chapter the chapter on
receivables before but now we've done it
and we have accounts receivable and we
have the account below it allowance for
doubtful accounts this is another one of
those darn contra accounts what does it
mean it means eighteen thousand is how
much I'm legally owed but I I've
estimated that three thousand of that
eighteen thousand isn't coming in so our
net receivables is the less than
eighteen thousand eight to eighteen
thousand minus three it's fifteen
thousand so let's put that in here
a our net and it's fifteen thousand and
just below at the bottom of my page I'm
gonna show that calculation I'm going to
say AR minus the allowance equals my AR
net and in this case it's eighteen minus
three equals fifteen
okay so there we have AR we have an
inventory of course 54,000 and prepaid
insurance six thousand
prepaid insurance and prepaid insurance
is absolutely current as is inventory so
adding this up sixty ninety nine
thousand I believe is our total kind of
an interesting number total current
assets now in terms of long-term assets
I see equipment and I see accumulated
depreciation equipment well again it's
an asset with a contra asset
I'm gonna go 125 - money to get 105
right equipment net so I'm gonna have
long-term assets and under there I'll
have equipment net and oh you know what
I didn't total in the right spot my
total of course goes to the left here
ninety nine thousand my equipment net I
believe was 125 minus 20 its 105 and
that gives us our total assets our grand
total here 99 plus 105 is 214
that's it we've done our total assets
double underline their dollar sign at
the top of each column and beside the
bottom line I'm not spending tons of
time explaining each step because if
you're shaky about your financial
statements go back to chapter 1 and get
a feel for them this is started as the
build on unto that looking at
liabilities accounts payable wages
payable unearned revenues would all be
current bank loan payable long term
there's no current portion noted we'll
just assume there isn't one
so accounts payable wages payable
unearned revenues all current lie T's ap
wages payable unearned revenues unearned
revenues might be have been one we
haven't seen before on a balance sheet
but of course it's even though it says
revenue it's a liability it's when
somebody's paid doing in advance for a
service and you haven't delivered the
service so it's something that you owe
15 7 + 5 total here is 27,000 that's our
total current on to long term
liabilities and it's really just the one
so I'll call it a liability if you call
the liabilities that would be fine with
me it is a bank loan payable and the
amount here is 84 grand so the total
liabilities 27 + 84 is a hundred and
eleven thousand dollars okay now we just
have to do our equity and our equity
doesn't come from here it comes from our
statement of changes in equity we have a
thousand of common shares nine
two of retained earnings that's it a
thousand of common shares ninety-two
thousand of routine earnings
shareholders equity common shares a
thousand retained earnings ninety two
thousand this totals to ninety three
thousand that's our total s EE our total
shareholders equity bringing us down to
our grand total total liabilities and
shareholders equity 111 plus 93 it
equals two hundred oh is that right
111 plus 93 I feel like it's right but
maybe not having second thoughts here
111 plus 93 I think I'm off 1 1 1 plus
93 204 I'm off by 10 grand what am i off
by 10 grand I'm not sure why Oh
on the other side 99 plus 105 is 204
what a silly mistake it does equal 204
over here just shows you how to quickly
fix a mistake put a dollar sign on top
of each column a dollar sign beside the
bottom line and there we have it ladies
and gentlemen a balance sheet that
balance is so we've done it we've solved
problem 6 for a as always if this video
has been useful to you if it's been
helpful to you I'd love you I love you
I'd love it if you hit the thumbs up
button and would consider subscribing to
this channel on YouTube alright hope
this helped have a great day
talk to you soon
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