Okay, everybody, we've been working through problem 13A. We've prepared our income statement, our summary of revenues and expenses, and we learned our company made a profit of $20,700. We worked through our statement of changes in equity, summarized how our common shares and retained earnings changed for the year, and now it's time to move on to the balance sheet. So to start with, let's just write in our title. Now, If you're preparing this and you've got a nice clean piece of paper, I advise students the first few times they do a balance sheet to actually turn that piece of paper sideways.
So I guess if you're on a printer, you would say, oh, I'm printing in portrait mode. When you're printing the normal vertical way, when you turn it sideways, you're in landscape mode. You kind of want to do this one in landscape mode.
It's a pretty wide statement we'll be preparing, and it'll just help to have a little bit more real estate your first time. And if you're not going to do that, just be aware that we're doing a wide statement here. Okay, so name of our company is a three line title as always. The name of our company is Sherry's Shuttles.
The name of our financial statement is the balance sheet. This is also frequently called the statement of financial position, but we call it a balance sheet. And the balance sheet does not say for the year end, for the month end, for the quarter end.
The balance sheet just gets dated. So we're just going to put the date December 31st, 2024 on the top. You might say, well, why? We said for the year ended on the income statement. We said for the year ended on the statement of changes in equity.
Why don't we say that on the balance sheet? Why do we just give it a date, December 31st? The reason is, if we think about what's on the balance sheet, It doesn't make sense to say for a year. So for example, we want to know on December 31st, how many dollars worth of cash the company has.
Like how many dollars of cash in the bank does the company have? Well, I don't need to know how much they had on, you know, if I'm looking at December 31st, I don't need to know what their cash balance was on February 1st and February 2nd and February 3rd and March and April and May. I want to know how much cash they had in the bank on December 31st, 2024. No other date, right?
For the year, I'd have to get 365 numbers for cash, right? One for every day. And in fact, it would change throughout the day. We just want to know at midnight or 1159pm on December 31st, how much money did you have? How many dollars worth of equipment did you have?
How many? How big were your debts on that date in that moment? So that's what we're looking at here on the balance sheet. So we're going to list all of our assets and I do this all in capital letters. Assets on the left.
On the right, we're going to list all of our liabilities. And somewhere down here, we're going to list our equity accounts. Now, you don't have to write that SE here because, you know, I can erase this really easily in my software. It might be harder for you to erase.
So just know that, OK, I've got equity coming somewhere down there. And at the end of the day, if I total my left side, it's going to match my right side, right? assets equals liabilities plus shareholders equity.
So let's get down to business. We're going to list our assets. So we'll start there.
I'm going to erase all my highlighting and I'm going to highlight just the assets. Cash, we got buildings, equipment, come on pen. We've got accounts receivable.
We got office supplies. I think that's it. So We want to list them and we want to list them in order and the order is called order of liquidity. And it just means the most current to the most long term.
So looking at our most current assets, like cash is considered to be the most current, it's it's very, very liquid. Buildings and equipment would be more long term in nature. Now, if I had to list like what comes first, buildings or what is more liquid or shorter term of those two, they're both long term, but what's the more short term? I would say equipment lasts us like five to 10 years. Buildings last us 20 to 40 years.
Buildings should be more long term. So buildings is going to come last, equipment will come before that, cash will come first. Now looking at our other current assets, accounts receivable or office supplies, accounts receivable, we assume will be collected in 30 days.
So they're considered quite liquid, more liquid than office supplies. Office supplies are not likely to be gone through that. quickly and certainly they don't convert to cash very readily so they're not considered very liquid so my list is gonna go for current assets Cash first, then accounts receivable, then office supplies.
So again, order of liquidity. What's the most cash-like coming first? Cash, AR, then office supplies.
Let's do it. So under assets, we have current assets as a subcategory here. And we have cash, accounts receivable, which I always say is AR. And office supplies. Under long-term assets, and I'll leave a bit of room for total.
Actually, I don't know, just write that now. Total current assets. And then we'll have long-term assets.
This category can also be called property, plant, and equipment, PP&E. And there might be other categories for like... investments and things like this.
But we've just got the two we've got equipment, which we said comes before building. So equipment net, and then building net. And let's just list those amounts and total everything up. So cash comes first 5000, then AR 1000, then supplies 500 5000 1500. $5,000 under cash, $1,000 by AR, $500 by office supplies. Total, 5 plus 1 is $6,000, plus $500 is $6,500.
Remember, if I have a list of sums, I list them on the left, I total them towards the right. For long-term assets, equipment is $30, building $100. 30 plus 100, well, that's 130. And that is my total long-term assets.
Again, this also gets called property, plant, and equipment. It also gets called capital assets. But fair enough just to call them long-term for now. 130 plus 6 is 136,500. And that is our total assets.
Again, I've added my current assets. to my long-term assets, 6,500 in current, 130 in long-term, to get a total of 136,500. We've done the left side of our balance sheet. It's time to move over to our right side.
So we've done all of our assets. We highlighted them and dealt with them. Let's deal with our liabilities now. I got wages payable. I got accounts payable.
I got a bank loan. I think that is it with an L beside it. So let's go from there. So current liabilities, I have two, wages payable and accounts payable.
From my experience, accounts payable generally gets listed first. This is a big liability number. It's going to turn over in 30 days.
Wages payable may actually be less or around the same amount of time, but just by experience, I've seen accounts payable kind of come up first. Wages payable often gets grouped with other. They call them accrued liabilities. But let's deal with accounts payable first. So we have current liabilities.
And under that, we have accounts payable and wages payable. And I've forgotten the amounts, so let's go all the way back. Back up. $2,200 and $1,600.
Okay, so that's $3,800 in total. Current liability. Now in terms of long-term liabilities.
I'm really making an effort to write more neatly. I know it's probably hard to tell, but I am trying. We just have the one.
We have the bank loan. $45,000. I should tell you a story about my handwriting one of these days. Liabilities. When I was in elementary school, they let me use a typewriter, and that was a bad scene.
I'm an older guy, and so it wasn't like a laptop. It was the clunkiest thing you ever saw in your life. I forgot the amount. Bank loan.
$45,000. I got made fun of a fair bit for having a typewriter in elementary school. Okay, adding it up, our total.
liabilities uh 48 800 uh okay so that's it for liabilities we don't double underline that because we're not done we also have to do shareholders equity and shareholders equity and again our intro class is composed of really two accounts common shares and oops common shares and retained earnings. Our common shares and retained earnings do not come from up here in the question. You might be thinking, hey, I know those, they're right, here and here. But remember, we're doing a balance sheet for December 31st, and these are January 1st amounts. Where do I get my December 31st equity amounts?
The statement of change is in equity. So I go down to my statement of changes in equity. I note I have common shares of 60 and retained earnings of 27.7.
Those are the numbers I'm going to use. Common share is 60, retained earnings 27.7. The total here is $87,700.
That's my total shareholders'equity. Now I need a grand total, and that total is total liabilities. And shareholders'equity, 48,800 was my liabilities. 87,700 is my shareholders'equity. Let's see, 48,800 plus 87,700.
Yes, indeed, it does equal 136,500. At this point, I know my balance sheet balances. It is a very... Very good sign.
So we need to put dollar signs at the top of each column. And in this case, I have one top of that column, a top there, top here, and top here. I don't need to put any in the equity section. It's not the top of any column.
Your prof may disagree with me there. So make sure you go with what they think of in terms of formatting. I also need dollar signs beside anything double underlined.
So dollar sign there beside 136.5. in both places. So you can see here our balance sheet balances, right? Assets equals liabilities plus shareholders equity.
This is a properly working balance sheet. It's got a good title. It's properly laid out and we've done a good job on our balance sheet.
Okay, in our next video, we'll do some basic ratios and we will wrap this up and I'm going to tell you all a very sad story about how I failed my first accounting exam. So stay tuned for that one. Bye for now.