EntranceCapital (basic) balance sheet equation. Balance summary
Section 1.
Topic 1.2 “Balance sheet, its structure and meaning”
“Balance sheet, its structure and meaning”
Developed
based
by academic discipline
"Accounting in
public catering"
teacher
Sheffer-Gruzd E.V.
1. The essence of balance sheet generalization and its role in accounting.
2. The concept of the balance sheet, its content and structure.
3. Purpose, requirements for drawing up a balance sheet. Classification of balance sheets.
4. Composition of Assets and Liabilities of the balance sheet. Contents and evaluation of balance sheet items.
5. Types of business transactions and their impact on the balance sheet.
The essence of balance generalization and its role in
accounting.
One of the main techniques for understanding the subject of accounting is summarizing data using a balance sheet.
Balance sheet - This is an accounting method that represents the economic grouping of property by composition, location and sources of its formation at a certain reporting date in monetary value.
The term “balance” comes from two Latin words bis – “twice” and lanh – “scale”, i.e. bilanh literally means “two cups” in the sense of equality, balance. Thus, any economic balance represents two systems of indicators, between which there is complete correspondence.
The balance sheet contains important methodological premises that determine the entire accounting methodology and the underlying principle of double entry. The balance sheet is the central form of accounting reporting and is built in accordance with the classification of accounting objects. It is a table consisting of two equal parts: one reflects funds by composition and placement - assets, and in the other – according to the sources of formation – passive The totals for assets and liabilities of the balance sheet are called balance currency. The balance sheet is built on the basis of balance sheet balance, which is expressed in the equality of the results of its two parts - assets and liabilities. Required condition compilation of the balance sheet is the division of assets and liabilities into short-term and long-term.
The concepts of “asset” and “liability”, like most accounting terms, are of Latin origin. “Active” means active (to act), therefore by asset we mean grouping of property (funds) of an economic entity, which shows how it functions and operates. "Passive" means inactive (to refrain, to explain), therefore passive is used to indicate the obligations of a business entity for its property.
Balance summary information is widely used in accounting and analysis of financial and economic activities to justify and adopt appropriate management decisions, orientation of the economic subject in a market economy.
Balance sheet generalization is characterized by the dual nature of the reflection of objects and the generalization of information (the principle of duality is a fundamental concept of accounting).
The dual nature of reflection is that objects are shown in the balance twice and are viewed from two points of view, in two aspects, which depend on the type of balance. Two aspects of balance sheet generalization mean that two sets of balance sheet indicators must be equal.
Balance sheet generalization presupposes the synthetic, generalized nature of information, which makes it possible to reduce particular indicators and individual information relationships in a single measure into an integral system of generalized data.
In accounting theory, there are several types of balance sheet generalizations:
· basic balance equation (static balance), which looks like this:
Active = Passive.
In the presented equation assets– the total property of an economic entity, and passive– the sum of sources of formation of property or the sum of external obligations of an economic entity and obligations to the owner. In this equation, capital is not a balancing item, it is treated as a liability item;
· capital balance equation, as follows:
Asset – Liabilities = Capital.
This equation is based on the fact that the right of ownership of property is of decisive importance in the financial stability of an economic entity; If liabilities are classified according to ownership, then two components can be distinguished: equity and obligations to external creditors. Any increase in the property of an economic entity (net property, which is understood as the total increase in property capable of generating income, and not just a change in the proportions of the component parts of the property) causes an increase in the corresponding parts of the liability - either external liabilities or equity capital. Thus, the capital balance equation reflects the principle of changes in net property: if its increase is caused by an increase in external liabilities, the capital will not change, otherwise there will be a capital gain. The effective increase in property is associated, first of all, with the increase in profit of an economic entity. The capital balance equation has another meaning: any increase in the net assets of an economic entity leads to an increase in capital (in the form of an increase in profit), any decrease leads to a decrease in it (in the form of a loss, which is reflected as a counter-item to capital);
· dynamic balance equation can be represented as follows:
Income – Expenses = Profit,
Profit = Capital Gain =
Credit balance on capital accounts at the end of the period –
Agreement
Rules for registering users on the website "QUALITY MARK":
It is prohibited to register users with nicknames similar to: 111111, 123456, ytsukenb, lox, etc.;
It is prohibited to re-register on the site (create duplicate accounts);
It is prohibited to use other people's data;
It is prohibited to use other people's e-mail addresses;
Rules of conduct on the site, forum and in comments:
1.2. Publication of personal data of other users in the profile.
1.3. Any destructive actions in relation to this resource (destructive scripts, password guessing, violation of the security system, etc.).
1.4. Use as a nickname obscene words and expressions; expressions that violate the laws of the Russian Federation, ethical and moral standards; words and phrases similar to the nicknames of the administration and moderators.
4. Violations of the 2nd category: Punishable by a complete ban on sending any types of messages for up to 7 days. 4.1. Posting information that falls under the Criminal Code of the Russian Federation, the Administrative Code of the Russian Federation and is contrary to the Constitution of the Russian Federation.
4.2. Propaganda in any form of extremism, violence, cruelty, fascism, Nazism, terrorism, racism; inciting interethnic, interreligious and social hatred.
4.3. Incorrect discussion of work and insults to the authors of texts and notes published on the pages of the "SIGN OF QUALITY".
4.4. Threats against forum participants.
4.5. Posting deliberately false information, slander and other information discrediting the honor and dignity of both users and other people.
4.6. Pornography in avatars, messages and quotes, as well as links to pornographic images and resources.
4.7. Open discussion of the actions of the administration and moderators.
4.8. Public discussion and assessment of current rules in any form.
5.1. Swearing and profanity.
5.2. Provocations (personal attacks, personal discredit, formation of a negative emotional reaction) and bullying of discussion participants (systematic use of provocations in relation to one or more participants).
5.3. Provoking users to conflict with each other.
5.4. Rudeness and rudeness towards interlocutors.
5.5. Getting personal and clarifying personal relationships on forum threads.
5.6. Flooding (identical or meaningless messages).
5.7. Intentionally misspelling nicknames or names of other users in an offensive manner.
5.8. Editing of quoted messages, distorting their meaning.
5.9. Publication of personal correspondence without the express consent of the interlocutor.
5.11. Destructive trolling is the purposeful transformation of a discussion into a skirmish.
6.1. Overquoting (excessive quoting) of messages.
6.2. Use of a red font intended for corrections and comments by moderators.
6.3. Continuation of discussion of topics closed by a moderator or administrator.
6.4. Creating topics that do not carry semantic content or are provocative in content.
6.5. Create a topic or message title in whole or in part in capital letters or at foreign language. An exception is made for titles of permanent topics and topics opened by moderators.
6.6. Create a signature in a font larger than the post font, and use more than one palette color in the signature.
7. Sanctions applied to violators of the Forum Rules
7.1. Temporary or permanent ban on access to the Forum.
7.4. Deleting an account.
7.5. IP blocking.
8. Notes
8.1. Sanctions may be applied by moderators and administration without explanation.
8.2. Changes may be made to these rules, which will be communicated to all site participants.
8.3. Users are prohibited from using clones during the period of time when the main nickname is blocked. In this case, the clone is blocked indefinitely, and the main nickname will receive an additional day.
8.4 A message containing obscene language can be edited by a moderator or administrator.
9. Administration The administration of the site "SIGN OF QUALITY" reserves the right to delete any messages and topics without explanation. The site administration reserves the right to edit messages and the user's profile if the information in them only partially violates the forum rules. These powers apply to moderators and administrators. The administration reserves the right to change or supplement these Rules as necessary. Ignorance of the rules does not relieve the user from responsibility for violating them. The site administration is not able to verify all information published by users. All messages reflect only the opinion of the author and cannot be used to evaluate the opinions of all forum participants as a whole. Messages from site employees and moderators are an expression of their personal opinions and may not coincide with the opinions of the editors and management of the site.
When generating accounting data, the capital, or basic, equation of the balance sheet is used, which has the form
Asset = Capital + Liabilities.
The sum of an organization's capital and liabilities is called a liability.
The economic meaning of the above equation is that the acquisition of the organization’s property must be ensured by the availability of appropriate sources: capital and accounts payable, the repayment period of which has been postponed for some reason.
For some types of accounts payable, repayment of obligations is deferred by law. These types of obligations are called sustainable liabilities and are taken into account when determining the sources of financing of the organization's working capital on a par with its own funds. Such liabilities include, for example, debt for the amounts of wages accrued to employees of the organization for the past month (second half of the month). The date of payment of wages, as a rule, does not coincide either with the moment of sale of products, works or services, or with the end date of the reporting month. Consequently, during the period between the end of the reporting month and the established payment deadline, the organization can use these amounts to acquire new assets. It is assumed that the amounts of remuneration included in the cost of products, works or services are reimbursed in the amounts of received payment or recorded receivables. This category of liabilities includes refundable taxes, the payment deadline for which is also deferred compared to the end of the reporting month.
It also follows from the capital equation that any change in capital and liabilities must be accompanied by an increase or decrease in an asset. If transactions are carried out as a result of which the balance sheet currency does not change, but only the structure of assets changes, the structure and size of liabilities should not change.
The given consequences of the basic equation are also used in determining the corresponding accounts in the process of preparing accounting entries.
From the capital equation of the balance sheet, another equation can be derived, on the basis of which the size of the organization’s equity capital is determined:
Capital = Assets – Liabilities.
This equation is used to determine the size of an organization’s equity capital in general and to determine the value of assets acquired at its own expense, in particular. Such property is called the net assets of the organization - this is property acquired at the expense of the organization’s own funds (including authorized capital, profit and reserves).
In the event that the size of net assets becomes less than the size of the declared authorized capital, the company or partnership must either reduce the authorized capital, or change the legal form, or be liquidated.
The collection and subsequent grouping of data based on the use of double reflection of operations is called balance generalization.
Balance sheet generalization involves organizing current accounts in such a way that as a result of any business transaction carried out and reflected in the accounting, balance sheet equality is not violated.
Let's look at examples of how business transactions affect the balance sheet. Operations affecting the balance sheet are usually divided into four types.
When drawing up a balance sheet, you must proceed from certain requirements (truthfulness, clarity).
All organizations engaged in business activities, regardless of their form of ownership, that are legal entities, draw up a balance sheet in a single form. Balance sheet items are filled out on the basis of the General Ledger, as well as on the basis of various statements and order journals.
A homogeneous part of the composition or sources of funds is called a balance sheet item, for example, in the balance sheet under the items “Accounts payable” debts to suppliers, subsidiaries, the budget, etc. are presented.
The total amount for assets and liabilities is called the balance sheet currency. The balance sheet is presented in the reporting in Form No. 1.
There are 4 types of business transactions:
1. Characterized by a change in asset items with a constant balance sheet currency (+ asset - liability for the same amount, for example: money received from the current account to the cash desk - Dt50 Kt51 ). This type of operation can be cleverly represented as the equation A+x-x=P
TO operations of the first type include all operations involving the use of material assets in the production process, the release of finished products from production, the repayment of accounts receivable, the receipt of funds in cash from a current account, etc.
2. Characterized by a change in liability items with a constant balance sheet currency (+ liability - liability for the same amount, for example: it was decided to allocate part of the net profit to increase reserve capital - Dt84 Kt82 ). This operation can be represented as the equation A=P+x-x
TO Operations of this type include all business operations involving deductions from wages, the formation of a reserve fund, the accrual of dividends from retained earnings, etc.
3. Characterized by changes in items in both the assets and liabilities of the balance sheet in
side of increase (+ asset + liability by the same amount, for example: from
materials received from suppliers - Dt10 Km 60
).
This operation can be
write as an equation A+x=P+x
TO This type includes crediting funds against debt on contributions to the authorized capital, calculating depreciation on fixed assets, intangible assets, calculating social tax, wages, obtaining loans, etc.
We examined five elements of financial statements that form the main accounting or balance sheet equation (balance-sheet (accounting) equation), which characterizes the financial position of the enterprise.
The main type of balance sheet equality is as follows:
Assets = Liabilities + Equity
Balance sheet equality combines the three components of the balance sheet, and from it follows the definition of capital, which was given above. It should be noted that there is another term widely used in the West - net assets, which are equal to assets minus liabilities, or purely mathematically - equity capital.
In general, the use of the adjective “net” in relation to assets means subtracting the corresponding liabilities; for example, net current assets are current (current) assets minus current (current) liabilities.
In addition to income and expenses, there are two more operations that influence the amount of equity capital and reflect the relationship of the enterprise with the “outside” world: investments and withdrawals of owners.
They can also be introduced into the basic balance equation:
Assets = Liabilities + Equity +
+ Income – Expenses + Investments – Withdrawals
However, in this form, balance sheet equality is used quite rarely, although it most clearly demonstrates not only the process of increasing capital as a result of the company’s own activities, but also the possibilities for changing it brought from outside. Despite its simplicity and obviousness, the basic accounting equation makes it possible to present in the most general form the funds, operations and results of the enterprise and their reflection in the financial statements.
3.2. Structure and content of financial statements
Financial statements published by Western companies are colorfully designed booklets, which, in addition to the forms of financial statements certified by the auditor, contain a lot of other information. As a rule, this is an address from the president of the company to shareholders, a report of the board of directors, an analysis of the company’s development for previous periods, a forecast for the coming years, a description of the geography and size of investments, international relations, story about social policy companies with various graphs, diagrams, diagrams, photographs, etc. Such information is not regulated and is presented at the sole discretion of the company. However, it is very important for users as an additional source of data for decision making. The amount of such information is determined by opposing trends: on the one hand, this is the desire of managers to advertise their activities and attract new investors, on the other, an attempt to hide confidential information that could harm the interests of the company. IN Lately large Russian companies, in particular banks, also began to publish their reports in this form. Financial reporting itself includes a varying number of reports, which are regulated by the rules or standards of the relevant countries.
Summarizing and analyzing the goals of various groups of interested users of accounting (financial) information, the International Financial Reporting Standards Committee issued the IFRS 1 “Presentation of Financial Statements” standard, the purpose of which is to create a regulatory framework for the formation and presentation of a single unified general purpose accounting (financial) statement for ensuring its comparability.
To achieve the above goal, this Standard establishes:
− uniformity of rules for the presentation of accounting (financial) statements;
− minimum acceptable requirements for its content;
IFRS 1 regulates the formation and presentation of all forms of general purpose accounting (financial) statements intended for users interested in them who do not have the opportunity to request additional, that is, more specific information about an economic entity.
The management body of an economic entity is responsible for the preparation and presentation of accounting (financial) statements.
Full set accounting (financial) statements must include:
− Balance sheet;
− Profit and loss statement;
− Statement of changes in capital;
− Cash flow statement;
− Accounting policies;
− Explanatory notes.
The economic entity is encouraged to provide additional financial and non-financial information.
Information disclosure.
Accounting (financial) statements must be identified and distinguished from other information presented. Moreover, all IFRS requirements apply only to accounting (financial) statements. All other information is not regulated and is presented at the discretion of the governing body of the economic entity.
Each component of the accounting (financial) statements must be clearly defined.
In addition, the following indicators must be indicated and repeated:
− name of the economic entity or other identifying features;
− whether the reporting covers an individual economic entity or a group of entities;
− reporting date or period, depending on the reporting form;
− reporting currency;
− level of accuracy used when reporting figures.
Accounting (financial) statements, according to IFRS 1, must be presented at least once a year.
If reporting is submitted in a period other than the above, the economic entity is obliged to provide justification for this deviation. At the same time, he is obliged to disclose:
− the reason for deviation from the generally accepted period;
− the fact that the comparative amounts of the reports are not comparable.
Balance sheet
Regular and consistent presentation to interested users of accounting (financial) information about the availability of resources at the disposal of an economic entity and the obligations assumed by it in the form of a statement of financial position is one of the fundamental goals of accounting. This form of reporting is traditionally called a balance sheet.
Balance in international practice is presented in two forms:
1) accounting form/horizontal;
2) report form/vertical
In practice, the vertical form of the report predominates.
Balance sheets also differ in terms of terminology.
− in American practice, the asset of the balance sheet is called assets, the liability - liabilities and capital;
− in German, French, Italian, the traditional terms of asset and liability are used.
Based on the placement of sections and articles (proformas), balance sheets are usually divided into:
− American,
− English (Anglo-Saxon),
− continental.
Asset items are placed in the American balance sheet in descending order of their liquidity, in the English balance sheet – in ascending order.
Liability items in English and American balance sheets are listed in descending order of demand, starting with liabilities and ending with capital.
In continental balance sheets, on the contrary, liabilities begin with capital.
A feature of the English balance sheet is the placement of short-term/all accounts payable in the asset as a separate counter-item to short-term/all assets, and there is also an item of net assets. Net assets are also called working capital, and the totality of capital and liabilities is called employed capital.
In general, balance sheets look like this: American balance sheet
Assets = Liabilities + Capital
continental balance
Assets = Capital + Liabilities
English balance
Assets – Liabilities = Capital
All types of balance sheets are recognized by international standards. But IFRS 1 defines a number of requirements for the presentation of information in the balance sheet.
An economic entity can divide its assets and liabilities into short-term and long-term.
In the event that such a division is not made, then assets and liabilities may be presented in the order of their liquidity.
It should also be noted that all amounts to be reimbursed and repaid must be divided according to the terms of reimbursement or repayment within 12 months and over a longer period.
Short-term assets.
These assets include:
− assets intended for sale or use in normal conditions management within the normal operating cycle of an economic entity;
− assets intended for commercial purposes or for a short period. At the same time, the economic entity expects to sell them within 12 months, starting from the reporting date;
− assets in the form of cash or cash equivalents without any restrictions on their use.
Short-term liabilities.
These obligations include:
− obligations expected to be repaid under normal business conditions during the normal operating cycle of an economic entity;
− liabilities to be repaid within 12 months after the reporting date.
An economic entity must classify all other assets and liabilities as long-term assets and long-term liabilities.
In addition, long-term interest-bearing obligations that are due to be repaid within 12 months can only be classified as long-term if:
− the initial period is a period exceeding 12 months;
− there is an intention to refinance this obligation on a long-term basis, with this intention necessarily secured by a refinancing agreement.
− IFRS 1 also defines the minimum composition of information that must be reflected in the balance sheet.
The minimum information that needs to be reflected in the balance sheet is line items:
− Fixed assets;
− Intangible assets;
− Financial assets;
− Investments accounted for using the participation method;
− Inventories;
− Trade and other receivables;
− Cash and cash equivalents;
− Debt of buyers and customers and other receivables;
− Tax obligations and tax requirements in accordance with IFRS 12 “Income Taxes”;
− Reserves;
− Long-term liabilities, including interest payments;
− Minority share;
− Issued capital and reserves.
Additional line items are disclosed in the balance sheet only when required by IFRS or when their presentation increases the degree of reliability of the financial position of an economic entity.
Other information, presented in the balance sheet or its annexes:
− Disclosure of subclassification of articles.
− Disclosure of the nature and amounts of receivables and payables:
Parent company;
Related subsidiaries;
Associated companies;
Related parties.
− Disclosure for each class of share capital:
Number of shares authorized for issue;
Number of shares issued in full, paid and not fully paid;
The nominal value of the share or an indication of the absence of this value;
Reconciliation of the number of shares at the beginning and end of the year;
Rights, privileges and restrictions associated with the relevant class of shares;
Shares owned by the company itself, its subsidiaries or associated companies;
Shares reserved for issue under option or sale agreements.
− Disclosure of the nature and purpose of each reserve within owners' capital.
− The amount of dividends proposed but not officially approved for payment.
− Amount of unrecognized dividends on cumulative preferred shares.
Gains and losses report
This report provides information on the results of the financial and economic activities of an economic entity for the corresponding reporting period.
Just like the balance sheet, the address part of the income statement contains information about the name of the company, the name of the report itself and the period for which it was compiled.
The income statement may have:
1) a one-stage form, when all income and all expenses are grouped separately, and net profit makes up the difference between them;
2) multi-stage form, when net profit is obtained through sequential calculations.
According to IFRS, the income statement must include the following minimum information:
The minimum information that must be reflected in the income statement is:
− Revenue;
− Operating results;
− Financing costs;
− Share of profits and losses of associates and joint ventures accounted for using the participation method;
− Tax expenses;
− Profit or loss from ordinary activities;
− Results of emergency circumstances;
− Minority share;
− Net profit or loss for the period.
Additional information in the income statement may be presented in the statement itself or in appendices to it.
This additional information may include an analysis of costs by their
A) character;
B) functions.
When using the first classification, expenses in the income statement are grouped according to their essence, and the report itself looks like this:
When using the second classification, expenses are classified depending on their functions as part of cost, sales or administrative expenses. The income statement looks like this:
Thus, we have examined how international standards recommend accounting for and reporting various income and expenses of an enterprise and what information should be disclosed in the profit and loss statement.
Let's look at an example of preparing a profit and loss statement.
Depreciation costs were included in fixed manufacturing overhead and were $418,000, and included in administrative expenses were $205,000. Total payroll and other staffing costs included in administrative expenses were $689,300.
(The income statement is based on two alternative classifications of income and expenses.)
for course work
"Accounting and 1C accounting"
for students of groups ME 61,62 and EM 61.
Department of Mathematical Economics
The main goal of the course work in the course “Accounting and 1-C Accounting” is not so much mastering the skills of maintaining accounting accounts and drawing up reporting documentation, but understanding the financial and economic information that is recorded by accounting, with the aim of mathematical modeling of the processes of the economic activity of the enterprise.
The guidelines consist of two parts. The first part provides basic information regarding the structure of the enterprise's balance sheet, profit and loss statement, and also provides the main indicators of the analysis of accounting information. The second part is devoted to the analysis of the course work.
Part 1. Basic information.
1.1. Balance sheet. Balance equation.
1.2. Gains and losses report.
1.3. Analysis of the financial condition of the enterprise.
Part 2. Instructions for completing coursework.
2.1. The essence of the course work.
2.2. An example of completing the first task.
2.3. An example of completing the second task.
Basic information.
Balance sheet. Balance equation
Formation of balance sheets is one of the most important tasks of accounting. Balance sheet generalization of information allows us to identify the financial and property position of an economic entity. This is achieved by dual grouping of accounting observation objects:
· according to their functional role in the process of production, economic and financial activities (economic content of the balance equation);
· according to the sources of formation of the property of a business unit (legal approach).
Balance sheets are designed to reflect the financial position of an economic entity at specific points in time: the date of creation of the organization; beginning and end of the reporting period; dates of preparation of interim financial statements; in cases of bankruptcy, liquidation, reorganization, for making management decisions and simply when such a need arises.
The basis of the accounting information system for any reporting or interim period is the incoming balance sheet. Subsequent facts economic life change the balance sheet figures. Accounting identifies, evaluates, classifies and records business transactions according to generally accepted principles, reflects and accumulates them in accounting systems, and brings them together to compile new balance sheets.
The balance sheet can be compared to a snapshot of the financial state of the enterprise, which reflects two images of equal size:
· what the enterprise has;
· from what sources this property appeared.
When constructing balance sheets, the following principles must be taken into account:
Monetary value– indicators are given in a single monetary measure that generalizes the objects of accounting observation into a homogeneous information model.
Separate property – the balance sheet relates to the enterprise, and not to persons associated with it (owners, creditors, debtors, etc.); The asset takes into account property owned by the enterprise or under full control.
Continuity - The period of time during which the enterprise will exist is unknown, its liquidation is not planned.
Accounting at cost – assets are shown on the balance sheet at the amounts paid, or to be paid, to acquire them (original cost), rather than at current market prices.
Dualities – the concept of duality is evident from the fact that the assets on the left side of the balance sheet are equal to the total equity and borrowed capital on the right side.
The balance sheet as an element of the accounting method crowns the procedure for processing accounting data, summarizing them into an information model of the financial condition of an economic entity. Information of this model, presented in the form of reporting indicators of balance sheet lines of the main form financial statements, acts as a significant source in assessing the functioning of a business unit, its production, economic and financial activities aimed at improving or developing the entire enterprise management system. Based on the data presented in the balance sheet, interested users have the opportunity to study the availability, placement and use of resources, solvency and financial stability of organizations and thus satisfy information needs. (see clause 1.3.)
The main element of the balance sheet (the unit of information reflected in it) is the balance sheet item (line). The balance sheet item corresponds to the indicator characterizing certain types of economic resources(assets) and sources of their formation (owner’s capital and attracted capital or liabilities).
In Russian accounting, the balance sheet is built based on the duality equation (Assets = Capital + Liabilities).
Balance sheet items are combined into groups. The basis of such a combination is the economic content of balance sheet items. Vertical relationships between balance sheet asset items suggest their arrangement in order of liquidity level. Less liquid items are reflected at the beginning, such as intangible assets, fixed assets, capital investments, etc., and at the end, the most liquid ones (cash on hand, in current and foreign currency accounts, etc.).
Balance sheet liabilities, like assets, are grouped according to the principle of increasing urgency of repayment of obligations. It begins with the foundation of the enterprise with own funds owners invested in the enterprise - authorized capital. This liability item, also called financial resources enterprise is the most sustainable. The authorized capital of an enterprise is considered formed when participants or shareholders make their contributions; its value can only be changed by the decision of the owners along with changes in the constituent and statutory documents of the enterprise. The amount of the authorized capital of an enterprise is the basis of its market stability, and in order to protect the interests of third parties doing business with this enterprise, this basis should not be undermined.
The authorized capital is followed by less stable items of equity, then liabilities that are due to be repaid in more than a year, and the balance sheet liability ends with short-term loans and accounts payable, items that can change values and share in the total balance sheet currency in a very short time.
Vertical relationships of balance sheet asset items influence the order of arrangement of balance sheet liability items. This is facilitated by horizontal relationships between the balance sheet items of assets and liabilities. For example, fixed assets are acquired from sources of own funds or long-term liabilities, and current liabilities are used mainly to replenish the current assets of an economic entity.
The figure shows horizontal relationships between individual sections of the balance sheet.
 |
|||
Section I Chapter III
Non-current assets Capital and reserves
Section IV
long term duties
Section II
Chapter
V
Current assets Current liabilities
Characteristics of asset items
The process of generating balance sheet data includes a large number of accounting works of a wide variety of nature. Preparatory work include inventory and adjustment of balances on accounting accounts, clarification of the value of property and liabilities, formation of funds and reserves provided for by accounting policies or current regulations, clarification of income and expenses between estimated reporting periods, identification of the final financial result of the organization and reformation of the balance sheet , preparation of a turnover sheet, which must include all adjusting entries (corrected entries for transactions of the reporting year are corrected by reversal; for transactions of previous years, in addition to the reversal entry, the amount of profit is adjusted). All of the above procedures should be carried out only when preparing the annual balance sheet. Periodic balance sheets are compiled on the basis of current accounting book data.
Form No. 1 is drawn up at the end of the reporting period and is a synthesis of the opening balance sheet for accounts opened during the year based on entries in accounting accounts, which must cover the business process completely and correctly reflect financial and economic activities based on the relationship between economic phenomena ( which is reflected in the correct correspondence of accounts).
Since the final balance sheet is formed as a result of financial and economic processes, individual transactions and economic phenomena, the basis for its compilation is the data of accounting registers: the general ledger, the turnover sheet, order journals, and auxiliary statements. Based on these registers, the General Ledger is filled out, where the account credit turnover is shown as a total amount and taken from the data of the corresponding order journal, and the debit turnover is given in the context of a number of accounts and can be collected from a number of order journals. Based on these turnovers and balances of the previous period, balances at the end of the period are calculated. These balances, after reconciliation with the data of the analytical and synthetic accounting registers, are used to generate data from Form No. 1. At small enterprises that keep records in a simplified form for drawing up a balance sheet, the Book of Accounting of Business Transactions is used. Accounting registers can exist in the form of a computer database, and programs for processing accounting information that comply with accounting rules allow you to avoid routine work and balance data is generated as correspondence of accounts and amounts are entered into standard forms primary documents.
All articles of form No. 1 are shown in a time context: column 3 - “At the beginning of the year”; Column 4 – “At the end of the period (year, quarter). The balance sheet data at the beginning of the year is identical to the final balance sheet data of the previous reporting period (Due to the implementation of the continuity requirement) and is formed in a similar way.
Based on the principle of constructing a balance sheet in the sequence of increasing liquidity of assets and mobility of liabilities, the asset of Form No. 1 opens with the section “Non-current assets”, which includes property and rights of different nature. Their combination in one section occurred due to their belonging to the least liquid funds.
The subsection “Intangible assets” reflects the value of non-traditional objects that do not have a physical form, but have the ability to generate income. A feature of these objects is the ability to use them over a long period (more than one year), as well as a high degree of uncertainty in the amount of profit possible from their use. This type of property includes the cost of intellectual property and various types of rights (patents, licenses, rights to use various resources, organizational expenses, software products, etc.).
It is reflected in the balance sheet minus accrued depreciation (according to the net valuation rule). The cost of intangible assets through depreciation is included in the cost of production and distribution costs (for assets of trading and intermediary organizations). Depreciation is accrued evenly and monthly, based on the useful life of the object, the rate of monthly depreciation is calculated, if the useful life cannot be determined, it is taken equal to ten years, the rate of deduction is determined as the quotient of the original cost of the object without VAT and the number of months of useful use. . For intangible assets, the value of which does not decrease with the deduction of time, depreciation is not accrued (Organizational expenses, trademarks, service marks, etc.). For completely worn-out objects, depreciation is terminated.
The subsection “Fixed Assets” displays data on fixed assets, both operating and mothballed. Objects of this kind include: buildings, structures, equipment, household equipment, etc.
Fixed assets are repeatedly involved in the production process and represent the cost of long-term investments. Like intangible assets, fixed assets are reflected in the balance sheet at their residual value, i.e. according to the actual costs of their acquisition and construction minus the depreciation accrued on them. A change in the original cost is allowed in the following cases: reconstruction, modification, additional equipment, partial liquidation, etc.
It should be noted that fixed assets include only objects whose cost exceeds one hundred times the minimum wage. Depreciation is not accrued for a number of fixed assets. Objects of this kind include: objects of housing stock, external improvements received free of charge, objects whose consumer properties do not change over time, etc.
Objects whose cost is not depreciated include land and environmental management facilities. In the balance sheet, fixed assets are reflected at their residual value and are located on lines 120; 121; 122 (The indicator of line 120 is calculated as the sum of the indicators of lines 121 and 122). The line 120 indicator can be determined according to the General Ledger data as the difference between the sum of the balances in the accounts “Fixed Assets” and “Income Investments in Material Assets” and the balance in the account “Depreciation of Fixed Assets”.
The subsection “Construction in progress” includes only one balance line, which reflects the balances in the accounts “Equipment for installation”, “Capital investments”, “Settlements for advances issued”.
Under this article, the enterprise reflects the cost of unfinished construction in the form of an excess of capital investment costs over the cost of objects put into operation, the amount of advances issued in connection with capital investments, etc. This article also reflects interest on a loan received by an organization for the purpose of acquiring fixed assets before their commissioning, tax on the purchase of vehicles, delivery costs for installing equipment, and other costs.
The subsection “Long-term financial investments” includes the following articles: “investments in subsidiaries”, “investments in dependent companies”, “investments in other organizations”, “loans provided to other organizations for a period of more than 12 months”.
These items show investments in conditional capital of other organizations, in securities states and legal entities, as well as various types of loans provided for a period of more than a year.
The source of information when filling out balance sheet items is the General Ledger for the accounts “Long-term financial investments” and “Valuation reserves”, the latter in the subaccount “Reserve for impairment of investments in securities.”
The section “Non-current assets” ends with the article “Other non-current assets”, which takes into account property that is not reflected in other articles of the section.
After filling out all the articles in the section at the beginning and end of the year using the appropriate sources of information (analytical accounting data, synthetic accounting registers), you should find the total amount of the enterprise’s non-current assets. To reflect it, there is an article “Total for Section I.” The indicator for this article, located in the balance sheet on line 190, is the sum of the indicators of all subsections and individual articles of the section “Non-current assets” at the beginning (column 3) and end (column 4) of the year accordingly, thus, the indicator of line 190 is calculated by calculation as the sum of data on lines 110; 120; 130; 140; 150.
The next asset section of the balance sheet is the “Current assets” section. Here we present property that is in circulation, i.e. in the process of economic activity, changing its natural material form and regularly turning into cash. The process of turnover of funds goes in two directions, on the other hand, property with a low degree of liquidity acquires it in the process of circulation, on the other hand, the company’s funds, which have absolute liquidity, take the form of reserves.
Section II of the balance sheet includes the following subsections: “Inventories”, “Value added tax on acquired assets”, “Accounts receivable for payments expected more than 12 months after the reporting date”; “Receivables for which payments are expected within 12 months after the reporting date”, “Short-term financial investments”; "Debit funds"; "Other current assets".
In the “Inventories” subsection, the enterprise reflects the remains of raw materials, various types of materials, household equipment, work in progress, finished products, goods, etc. The subsection opens with the article “raw materials and other similar assets”, which reflects the material assets accounted for in the accounts: “Materials”, “Procurement and acquisition of materials”. “Deviation in the cost of materials” “Low-value and high-wear items”; "Wear of the MBP."
The amount of balances for this balance sheet item depends on the method of writing off the actual cost chosen when forming the accounting policy. Materials of the same type can be purchased at different prices; as a result, the balances will be recorded at different values; it is necessary to determine the value of the remaining materials after writing off some of them for production. There are three methods of determination: at the cost of the first purchases (FIFO); at cost of last purchases (LIFO); at average cost. When using the LIFO method, balances are valued at the cost of the first acquisitions, which, in the face of rising prices for materials, leads to a decrease in profits and an underestimation of the value of inventories. With the FIFO method, balances are assessed satisfactorily to the reality requirement.
In the next article of the “Inventories” subsection, the organization reflects the balance of low-value and wearable items. This type of property includes household and production equipment, various kinds of low-value items that serve as means of labor, however, due to their properties, are included in working capital. Low-value and wearable items include items that last less than one year (regardless of cost) and cost at the date of purchase less than 100 times the minimum wage. Enterprises and organizations are given the right to set a lower cost limit.
Low-value and wear-and-tear items (IBP) cannot include agricultural machinery, working and productive livestock.
The next article in the subsection is the article “Costs in work in progress.” In it, the enterprise reflects the costs accounted for in the cost accounts: “Main production”, “Auxiliary production”, “Semi-finished products of own production”, “Completed stages of work in progress”, “Non-capital work”. In addition, this balance sheet item also reflects distribution costs (for organizations engaged in trading and intermediary activities).
The article “Finished products and goods for resale” reflects the cost of products that have completed their production cycle, as well as goods purchased for resale.
Goods sold on commission are reflected in the “Goods shipped” account and are not reflected in this balance sheet item. Goods accepted for commission are not reflected in the balance sheet at all.
It should be added that finished products consumed at the enterprise itself for production needs cannot be accounted for under this item of the balance sheet; they are accounted for in the accounts of materials, intermodal products, semi-finished products, etc.
Line (216) of the balance sheet contains the item “Goods shipped”. In it, the organization reflects the cost of goods and products shipped to customers, but before the transfer of ownership rights belonging to the enterprise. (Products and goods are accounted for under this article of Form No. 1 until the purchase and sale transaction is fully formalized with the relevant documents).
The next item in the balance sheet is the item “Deferred expenses”, which reflects the amounts of expenses incurred by the organization in the reporting period, but subject to repayment in the following reporting years during the period to which they relate.
Future expenses may also include: expenses for the preparation and development of production, rent payments for subsequent periods of time, expenses for the repair of fixed assets, if the organization does not create a repair fund, subscription to periodicals, expenses for training and education of specialists.
The next subsection of working capital is the article “Value added tax on acquired assets”.
This reflects the amount of value added tax (VAT) on purchased material assets and excise taxes on excisable goods. Supplier invoices separately highlight VAT amounts that are subject to debit to account 19 “Value added tax on purchased assets” in the context of the corresponding subaccounts (VAT on purchased small business enterprises, VAT on materials, VAT on works and services, etc. )
The “Inventories” subsection ends with the “other inventories and costs” article. This item reflects inventories and costs that are not reflected in other items of the subsection. Part of the business expenses related to the balance of unshipped products and unsold goods may be reflected here.
The following two subsections of current assets reflect the amount of receivables of the enterprise (organization), which is recorded in settlement accounts.
The overwhelming majority of accounts receivable are debts from buyers and customers for finished products and goods. Thus, the enterprise’s funds frozen in settlements represent a commercial loan that facilitates the process of forming its reserves and costs for the counterparty enterprise.
In the balance sheet, the value of property in calculations is presented in two subsections: “Accounts receivable, payments for which are expected more than 12 months after the reporting date” and “Accounts receivable, payments for which are expected within 12 months after the reporting date.”
The first article of the subsections is the article “buyers and customers”, which reflects the cost of goods shipped, work performed and services rendered under the contract until payment by the buyer or customer.
The next article of the subsections reflects the debt of buyers and customers, secured by bills received.
Line 273 contains the item “debt of subsidiaries and dependent companies”. This reflects the state of inter-balance sheet settlements between the main company and dependent subsidiaries. The settlement state can be either active or passive. The balance sheet asset reflects the balance of debt of subsidiaries (dependent) companies to the dominant, parent company.
As part of short-term receivables, there is an article “debt of participants (institutions) for contributions to the authorized capital.” It shows the status of settlements with the founders.
Account 75 “Settlements with founders” also reflects the accrual of dividends to third parties (the source is retained earnings), therefore, if the account has a credit balance, then this amount of debt is taken into account in the liability side of the balance sheet as part of accounts payable.
The next item in the accounts receivable subsections is the item “Advances issued.” In modern economic conditions, counterparties of enterprises sometimes require advances and prepayments for products, goods, work or services, both for the entire transaction amount and partially.
This section section can be completed based on analytical data on the state of both subsections of accounts receivable or in the absence of any type of it.
The accounts receivable sections end with the item “Other debtors”. In accordance with the rules for constructing a balance sheet, debts to the enterprise from various legal entities and individuals, government agencies, which are not reflected in other articles of the subsection, are reflected here. For example, here may be reflected the amount of debt on claims, the balance on settlements with the budget for overpayment of taxes, as well as the balance on extra-budgetary payments, debt to the enterprise of employees who received loans, debt to accountable persons for amounts issued to them.
The next division of current assets is the group of articles “Short-term financial investments. Investments made by the organization for a period of no more than a year are shown here. The items “Investments in dependent companies” reflect the amount of investments of organizations in the account of balance sheet investments.
The subsection of short-term investments ends with the article “Other short-term financial investments.” This may include the enterprise's investments in securities of various elements, loans provided by the enterprise to construction organizations.
The total amount of funds in the subsection “Short-term financial investments” in accordance with the structure of the balance sheet can be found by arithmetically simple addition of the amounts of balances for all items of the subsection (This is also true for other subsections of any part of the balance sheet).
The next subsection of working capital is the group of articles “Cash”, which reflects property that most often has absolute liquidity, i.e., in the form of the currency of the Russian Federation; in addition, less liquid property is also represented here, such as foreign currency.
Under the article "cash" of the enterprise. Organizations reflect the amount of funds accounted for in account 50 “Cash”.
Under the item “current accounts” the amount reflected is accounted for in account 51 “Current account”. The debit of this account reflects the receipt of funds, and the credit reflects the write-off.
The next article of the subsection – “Currency accounts” – reflects the amount of funds in foreign currency, which is recorded in account 52 “Currency account”.
The item “Other funds” reflects funds held in special bank accounts in the form of monetary documents and the amount of transfers in transit. Accounting for funds from special accounts is kept on account 55 “Special accounts in banks”. It shows the movement of funds in domestic currency in the form of various payment documents (letters of credit, checks, other payment documents, except bills).
The last subsection of Section II “Current assets” is the article “Other current assets”. This reflects the working capital of enterprises and organizations that are not reflected in other articles of the section.
After filling out all the articles in the section, it is necessary to calculate the total amount of funds invested by the organization in working capital. In the line “total for section II” it is necessary to add up all the amounts of subsections and individual articles that act as subsections. Thus, the indicator of line 270 is found arithmetically and represents the sum of funds on lines 210, 220, 230, 240, 250, 260, 270. (The total amount of the section is reflected on line 290)
After filling out the articles of all asset sections of the balance sheet, you should summarize its overall result, which will be the total value of the organization’s property, provided there are no losses. To reflect the total of Form No. 1 or the balance sheet currency, the “Balance” line is intended, the indicator of which is the total total of the main reporting form and is subtracted as the sum of the indicators of the section of Form No. 1.