Business Studies - Junior Secondary 3 - Balance sheet

TERM: 2^ND TERM

WEEK NINE      

Class: Junior Secondary School 3

Age: 14 years

Duration: 40 minutes of 5 periods each

Date:

Subject: BUSINESS STUDIES

Topic: BALANCE SHEET

SPECIFIC OBJECTIVES: At the end of the lesson, pupils should be able to

I.)  Explain the meaning of balance sheet

II.)  Contents (State the items in a balance sheet)

III.)  State the uses of balance sheet

IV.) Classify item - Asset liabilities, Capital,

V.) Classify assets into fixed and current, Distinguish capital from liabilities.

VI.)  Prepare a simple format of a balance sheet                                         

VII.) Differentiate between vertical and horizontal balance sheet.

INSTRUCTIONAL TECHNIQUES: Identification, explanation, questions and answers, demonstration, videos from source

INSTRUCTIONAL MATERIALS: Videos, loud speaker, textbook, pictures,

INSTRUCTIONAL PROCEDURES

PERIOD 1-2

NOTE

BALANCE SHEET

A balance sheet is a financial statement that provides a snapshot of a company's financial position at a specific point in time. It presents the assets owned by the company, liabilities owed by the company, and the shareholders' equity (or owner's equity) in the business. The balance sheet follows the fundamental accounting equation:

Assets = Liabilities + Equity

It is called a balance sheet because the total assets must equal the total liabilities and equity, ensuring that the accounting equation is balanced.

Contents of a Balance Sheet

A balance sheet typically includes the following items:

1. Assets:

   - Current Assets (e.g., cash, accounts receivable, inventory)

   - Fixed Assets (e.g., property, plant, equipment, intangible assets) 

2. Liabilities:

   - Current Liabilities (e.g., accounts payable, short-term loans, accrued expenses)

   - Long-Term Liabilities (e.g., long-term loans, deferred tax liabilities) 

3. Equity:

   - Common Stock (shares issued to shareholders)

   - Retained Earnings (accumulated profits not distributed as dividends)

   - Additional Paid-in Capital (additional capital raised through issuance of shares)

Uses of Balance Sheets

1. Financial Position Assessment: Provides insights into the financial health and stability of the company.
2. Investment Decision-Making: Helps investors and creditors assess the company's ability to meet its financial obligations and its potential for growth.
3. Financial Reporting: Essential for external reporting to stakeholders, including shareholders, regulators, and potential investors.
4. Internal Management: Assists management in making strategic decisions, budgeting, and financial planning.

Classification of Items in a Balance Sheet

Items in a balance sheet are classified into:

1. Assets:

   - Current Assets: Expected to be converted into cash or used up within one year (e.g., cash, accounts receivable, inventory).

   - Fixed Assets: Long-term assets used in the production or operation of the business (e.g., property, plant, equipment).

2. Liabilities:

   - Current Liabilities: Obligations due within one year (e.g., accounts payable, short-term loans).

   - Long-Term Liabilities: Obligations due beyond one year (e.g., long-term loans, deferred tax liabilities).

3. Equity:

   - Represents the owners' residual interest in the company's assets after deducting liabilities.

Differentiation of Capital from Liabilities

I.) Capital (Equity): Represents the ownership interest of the shareholders in the company. It includes common stock, retained earnings, and additional paid-in capital.

II.) Liabilities: Represent the obligations or debts of the company to external parties. Liabilities must be repaid or settled by providing assets or services.

Simple Format for a Balance Sheet`

Balance Sheet

As of [Date]

Assets

Fixed Assets:

Liabilities and Equity

EVALUATION: 1. What is the meaning of balance sheet?

2. Mention 5 contents of a balance sheet
3. State 4 uses of a balance sheet
4. Differentiate between vertical and horizontal balance sheet.

CLASSWORK: As in evaluation

CONCLUSION: The teacher commends the students positively