Balance Sheet

Constructing a Simple Balance Sheet

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Priya Kaur

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Christian Bien

Learning Objectives

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Worked Example: Grape Vines Ltd
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Below is a sample question for Grape Vines Ltd. This page goes through the step-by-step process of constructing a Balance Sheet from information provided by a trial balance. 


Grape Vines Ltd After Closing Trial Balance as at 30 June 2020 

  • Share capital 700,000 

  • Asset revaluation reserve 11,500 

  • General Reserve 47,000 

  • Retained Earnings 411,000 

  • Cash at bank 360,000 

  • Accounts receivable 40,000 

  • Accrued interest income 7,000 

  • Inventory 203,000 

  • Prepaid expenses 5,000 

  • Land 300,000 

  • Plant and equipment 207,000 

  • Accumulated depreciation of plant and equipment 17,000 

  • Goodwill 29,000 

  • Shares in companies 100,000 

  • Accounts payable 5,000 

  • Accrued expenses 1,500 

  • Income tax payable 3,000 

  • Unearned Income 2,000 

  • Debentures 13,000 

  • Mortgage loan 40,000 

Note: The investments (share in companies) are expected to be owned for more than 12 months . The debentures are repayable within 12 months. 


Prepare a balance sheet for Grape Vines Ltd as at 30 June 2020.

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Step 1: Classify the Accounts
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The first step is to classify the accounts provided into the appropriate Asset and Liability sections they belong to in the balance sheet: 


Current Assets: 

To recap, these are cash and other assets that will be consumed or concerted into cash within 12 months. Therefore in this question, the following accounts are classified as current assets: 

  • Cash at bank 

  • Accounts receivable 

  • Accrued interest income

  • Inventory 

  • Prepaid expenses. 


Non-Current Assets: 

These are assets that will bring a future benefit to the business for more than 12 months of the current balance sheet date. 

The following accounts are classified as non-current assets: 

  • Land 

  • Plant and equipment (Less accumulated depreciation) 

  • Goodwill 

  • Shares in Other Companies (these are expected to be owned for more than 12 months).


Current Liabilities: 

Those debts that will be settled within 12 months of the current balance sheet date. The following accounts are classified as current liabilities: 

  • Accounts payable 

  • Accrued expenses 

  • Income tax payable 

  • Unearned income 

  • Debentures 


Non-current Liabilities: 

Those debts that will not be settled within 12 months of the current balance sheet date. The following accounts are classified as non-current liabilities: 

  • Mortgage loan.

  • Long-term loans

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Step 2: Assets - Consolidate the Account Balances from the Trial Balance to the Appropriate Line Classifications.
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1) Assign the account balances from the trial balance to the appropriate standard line classifications: Below shows the line classification with the consolidated accounts in brackets. 


Current Assets: 

  • Cash and Cash Equivalents (Cash at bank) 

  • Receivables (Accounts Receivable, Accrued Interest) 

  • Inventories (Inventory) 

  • Other Current Assets (Prepaid Expenses) 


Non-Current Assets: 

  • Investments: (Shares in Companies) 

  • Property, Plant and Equipment (Land, Plant and Equipment less Accumulated Depreciation) 

  • Other Intangible Assets – N/A 

  • Goodwill 

2) Calculate each line classification Current Assets: 

  • Cash and cash equivalents= 360,000 (Cash at Bank) 

  • Receivables= 40,000 (Accounts Receivable) + 7,000 (Accrued Interest) = 47,000 

  • Inventories = 203,0000 - Other current assets = 5,000 (Prepaid Expenses) 

Total Current assets: 360,000 + 47,000 + 203,000 + 5,000 = $ 615,000 


Non-Current assets: 

  • Investments = 100,000 (Shares in Companies) 

  • Property, plant and equipment= 300,000 (Land)+ 207,000 (Plant and Equipment) - 17,000 (Less Accumulated Depreciation at Cost)= $ 490,000 

  • Goodwill = 29,000 Total Non-Current Assets: 100,000 + 490,000 + 29,000 = $ 619,000 

Total Assets: Total Current Assets + Total Non-Current Assets = 615,000 + 619,000 = $1,234,000

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Step 3: Liabilities - Consolidate the Account Balances from the Trial Balance to the Appropriate Line Classifications.
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1) Assign the account balances from the trial balance to the appropriate standard line classifications: 


Current Liabilities: 

  • Short-Term Borrowings: (Debentures - repayable within 12 months) 

  • Payables (Accounts Payable, Accrued Expenses) 

  • Income Tax Payable 

  • Other Current Liabilities (Unearned Income) 


Non-current Liabilities: 

  • Long-Term Borrowings (Mortgage Loan) 


2) Calculate each line classification 

Current Liabilities: 

  • Short-term borrowings= 13,000 (Debentures) 

  • Payables= 5,000 (Accounts Payable) + 1,500 (Accrued Expenses) = 6,500 

  • Income Tax Payable = 3,000 

  • Other Current Liabilities= 2,000 (Unearned Income) 

Total current liabilities= 13,000 + 6,500 +3,000 +2,000 = $ 24,500 


Non-current liabilities: 

  • Long-Term Borrowings= 40,000 (Mortgage Loan) 

Total Non-Current Liabilities= $40,000


Total Liabilities: Total Current Liabilities + Total Non-Current Liabilities = 24,500 + 40,000 = $ 64,500.

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Step 4: Completing the Equity Section of the Balance Sheet
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To calculate net assets, subtract the total liabilities from the total assets Net assets = 1,234,000 - 64,500 = $ 1,169,500 


1) Assign the account balances from the trial balance to the appropriate standard line classifications: 


Equity: 

  • Share Capital 

  • Other components of Equity (Revaluation Reserve, General Reserve) 

  • Retained Earnings 

2) Calculate each line classification

  • Share Capital = 700,000 

  • Other components of equity = 11,500 (Revaluation Reserve) + 47,000 (General Reserve) = 58,500 

  • Retained earnings= 411,000 

Total equity= 700,000 + 58,500 + 411,000 = 1,169,500. 


Tip: One way to check if your balance sheet is correct is to see if your figure for total equity is identical to your figure for net assets. If they match, your balance sheet is in balance!

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Structure of a Balance Sheet
Constructing a Simple Balance Sheet
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