100 WORD REFLECTION ON:

100 WORD REFLECTION

1. What is the most important learning from BALANCE SHEET?

2. How do you think the concepts covered today may be relevant to your studies in your Degree?

3. How do you think the concepts covered today may be relevant to your studies in your career of choice?

Content recap Balance sheets Also known as the statement of financial position. Based on the definition of equity from the Conceptual Framework: Assets Liabilities = Owner's Equity The balance sheet must always balance! Content recap Balance sheets What information does it present? What is the format? - T format - Narrative Asset and liability classifications Assets are measured at cost but may be revalued. Accounting policy choices are available which may see variation in the amounts recorded for certain assets across entities. Consider the following: - Accounts receivable - Non-current assets Accounting rules (standards) also dictate how assets should be measured. - Inventory Accounting policy choices Depreciation Impacts the reported values of non-current assets. Methods include straight-line, reducing (diminishing) balance, output based methods. Doubtful Debts Impacts the reported value of collectible receivables. Methods include aged analysis and percentage of credit sales. Inventory measurement The 'lower of cost and net realisable value' rule contained in the Accounting Standards stipulates the amount that inventory should be recorded at in the balance sheet. Inventory should be recorded at its cost price, but if it can no longer be sold above cost, it should be 'written down' to its net realisable value. The balance sheet and decision making How is balance sheet information used? What are some limitations of the balance sheet? - Alternative measurements/policies - Inflation may be ignored - Historical data