Unit 5 - Balance Sheet Help needed!

Hello there - wonder if anyone can help me! I am studying Unit 5 through distance learning.
I do not understand why certain figures go in certain columns in the balance sheet.
According to my text book , If you have 3 columns, the stock figure goes in the middlle column, yet the debtors figure goes in the left hand one. Also the prepayments and cash figure goes in the middle column. Is there some logical reason as to why these figures go in certain columns!! The same goes for the liabilities - do they always appear in the left hand column then added up in the middle on??
I really would appreciate it if someone could explain this to me - or point me in the direction of a good resource which explains it well!!
Nicky

Comments

  • visha
    visha Registered Posts: 218 ? ? ?
    The principle is simple.

    If you look at any figure on financial statements and want to know how it was worked out; look to the left of it,


    Profit & Loss

    The stock figure is in the column that works out cost of goods sold. In that column you will have O/STOCK plus NET PURCHASES less C/STOCK.

    The worked out COGS will be put in the right column to that of above column, under Sales.

    The Net Purchases is worked out as Purchases less Purchase Returns. The Net Purchases (ie the result) will appear in the middle column and the other two figures will appear to the left of the result, showing how it was calculated.

    Balance Sheet

    In the same way the NET Debtors figure will appear in the middle column. The Net Debtors figure is arrived by taking away Provision for Bad debt from the SLCA (Debtors) figure.

    Figures in the middle column will show the Current Assets and TOTALED in the same column.

    The Current liability will be recorded in the column left to the above figures. However, its total will appear in the middle column as the TOTAL of all Current liability.

    Look carefully and you will notice that to the right of the TOTAL of all Current Liability, in the third column, a figure of WORKING CAPITAL will appear under the figure of NBV of FIXED ASSETS.

    WORKING CAPITAL = Total Current Assets less Total Current Liabilities.

    Therefore look at any figure in the financial statements and to understand how that figure is arrived at; look to the left of it for explanation.
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