THE ACCOUNTING AND THE BALANCE SHEET

Apumayta Huillca, Wilfredo.

Cruz Tarqui, Silvia
Rodriguez Torres, Erick
Eyzaguirre Macedo, Joselin
Capia Ramirez, Maricela Susana
Ttito Condori, Marcos

Universidad Alas Peruanas

Facultad De Ciencias Administrativas, Económicas, Contables Y Financieras
Escuela Profesional
Escuela Profesional De Ciencias Contables Y Financieras - Arequipa
2010
 THE ACCOUNTING AND THE BALANCE SHEET

Apumayta Huillca, Wilfredo.

Cruz Tarqui, Silvia
Rodriguez Torres, Erick
Eyzaguirre Macedo, Joselin
Capia Ramirez, Maricela Susana
Ttito Condori, Marcos

Subject
ENGLISH IV

Advisor
Lic. Carola Natalia Romero Vera

Universidad alas peruanas

Facultad De Ciencias Administrativas, Económicas, Contables Y Financieras
Escuela Profesional
Escuela Profesional De Ciencias Contables Y Financieras - Arequipa
2010

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 INDICE

LIST OF FIGURES..........................................................................................................................................3
ABSTRACT.......................................................................................................................................................4
INTRODUCTION.............................................................................................................................................5
CHAPTER I6
THE ACCOUNTING, BALANCE SHEET AND STRUCTURE 6
1.1. DEFINITION OF ACCOUNTING............................................................................................6
1.2. BALANCE SHEET...................................................................................................................6
1.2.1. DEFINICION.....................................................................................................................6
1.2.2. IMPORTANCE OF BALANCE........................................................................................6
1.2.3. OBJECTIVES OF THE BALANCE.................................................................................7
1.2.4. BALANCE SHEET STRUCTURE..................................................................................7
1.2.4.1. ASSET..........................................................................................................................7
1.2.4.2. LIABILITIES...............................................................................................................10
1.2.4.3. HERITAGE.................................................................................................................11
CHAPTER II 12
EXAMPLE OF BALANCE SHEET OF THE AKAL GROUP S.A.A. 12
CONCLUSIONS............................................................................................................................................15
GLOSSARY...................................................................................................................................................16
BIBLIOGRAPHY...........................................................................................................................................17
LIST OF FIGURES

ILUSTRACIÓN 1: BALANCE SHEET MODEL..........................................................................................................................14

Ilustración 2: Balance Sheet with Numbers...................................................................................................................14

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 ABSTRACT

This work presented below, is intended interpretation of concepts of accounting and

balance sheet in the English language.

For a better understanding and order has been given a structure to this work, as two main
chapters then be described in a synthetic manner.
In the first chapter develops the conceptualization of the accounts, Balance Sheet and
Structure.

And finally, the second chapter where the model of a company's balance sheet in an
exemplary manner.
It also considered the findings of work, a glossary of terms, and relevant literature for a
better presentation and understanding of the work.

Keywords: Balance sheet, Accounting, Assets, Liabilities.

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 INTRODUCTION

Accounting provides information about the financial position of a business or company.

Accountants create financial records of business transactions, and prepare statements

containing the assets, liabilities, and operating results of a business. They maintain and

audit these quantitative records, while preparing financial reports such as the income

statement, balance sheet, and statement of cash flows.

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 CHAPTER I

THE ACCOUNTING, BALANCE SHEET AND STRUCTURE

1.1. DEFINITION OF ACCOUNTING
Financial accountants produce financial statements based on Generally Accepted
Accounting Principles of a respective country. In particular cases financial statements
must be prepared according to the International Financial Reporting Standards.
Financial accounting serves following purposes:
 producing general purpose financial statements
 provision of information used by management of a business entity for decision
making, planning and performance evaluation
 for meeting regulatory requirements
The purpose of accounting is to provide the information that is needed for sound
economic decision making. The main purpose of financial accounting is to prepare
financial reports that provide information about a firm's performance to external parties
such as investors, creditors, and tax authorities.
1.2. BALANCE SHEET
1.2.1. DEFINICION
The balance sheet is the numerical representation of the financial situation of a
natural or legal person on a particular date.
Also known as the historic main statement, which reflects the assets of a
company at one time prepared in accordance with Generally Accepted
Accounting Principles (GAAP) and International Accounting Standards and
Interpretations SIC applying the Accounting General and within the framework of
the accounting doctrine.
1.2.2. IMPORTANCE OF BALANCE
The balance sheet consists of three parts: Assets, Liabilities and Equity. Assets
shows assets of the company, it’s assets and rights, while financial liabilities
detailing its origin is the company's obligations to third parties and their workers
in the short, medium and long term, on the other hand, the Heritage reflects the
social capital of the entity, its origin and composition.

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 The balance sheet is prepared on a given date, as the real financial situation of
the business in this day of financial accounting document will change from day to
day. The figures presented in this statement are dynamic and they change over
time.

1.2.3. OBJECTIVES OF THE BALANCE

The balance sheet also called statement of financial position is a basic financial
statement whose main objective is to present the financial position of a company
on a particular date, the resources you have and how they are financed.
Managers and external users need the information provided by these financial
statements to make decisions. Looking at the balance sheet, users can answer
questions such as: what kind of resources available to the company to carry out
their operations, how is the company's financial situation compared with others in
the same industry?, " what obligations you have?, can the company meet its
obligations in the short term?, what proportion of assets is being financed by the
owners or shareholders?
The balance is the financial statement presents the assets available to the
company and their origin through the liabilities and stockholders' equity, is
showing the assets, rights and obligations of the company in a given time.

1.2.4. BALANCE SHEET STRUCTURE

1.2.4.1. ASSET
Is referred to the resources available to the company for its operations
and is entitled to receive cash as money, banks, commodities, buildings,
office equipment, etc.
1.2.4.1.1. CURRENT ASSETS
Are assets that can usually convert to cash within one year.
A. ASSETS
Are the resources in order to own and normal operations is
sale of goods. Current assets are composed of, cash on
hand, cash at banks, accounts receivable from customers,
notes receivable, merchandise. The property's current assets
which becomes effective in the normal operating cycle.

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 These resources are ordered taking fin to account their
varying degrees of availability is greater or less easily and
quickly to become effective.
B. FIXED ASSETS
Are those that are intended to dispose of them to develop
the operations it performs, not to sell at the normal operating
cycle. In fixed assets is basically the land, buildings, office
equipment, distribution equipment, transportation equipment,
warehouses granted won aunt.

These resources are ordered taking into account their

greater or lesser degree of permanence as an investment in
your company marrow greater or lesser degree of
probability, be sold or discharged.

C. DEFERRED ASSETS
Is classified to the concepts of resources consisting of goods
or services purchased but whose use or consumption to take
place later. They are basically integrated the concepts of
organizational costs, installation costs, stationery and office
supplies, rent paid in advance, prepaid interest, insurance
premiums paid in advance, costs of advertising and
propaganda. The characteristic of deferred tax assets is that
either use or consumption, or over time become spending.

These resources are commonly ordered by their degree of

value in the company.

Classification and order of the concepts of passive

contributions of the creditors, le the liabilities are classified
taking into account that involve two types of debts or
obligations to our company.
1.2.4.1.2. NONCURRENT ASSETS
Are items a business cannot easily turn into cash and are not
consumed within the business cycle activity. Noncurrent assets
are defined as assets that have a life exceeding a year.

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A. FIXED ASSETS
Are materials, goods, services and land used in the
production of a company's goods. Examples include real
estate, buildings, plant equipment, tools and machinery,
furniture, fixtures, office or store equipment and
transportation equipment. All of these would be used in
producing products for a company's customers. Land,
equipment or buildings not used in the production of
customer goods would be listed as other noncurrent assets
or investments. Fixed assets are carried on the company's
accounting books at the price they cost at the time of
purchase. All fixed assets, except for land, are regularly
depreciated since they eventually wear out.
B. OTHER NONCURRENT ASSETS
Other noncurrent assets may include investments, advances
to and receivable from subsidiaries, and receivables from
officers and employees.
C. INTANGIBLE ASSETS
Are those that may have great value to an operating
company but limited value to creditors. Analysts tend to
discount these items or value them very conservatively.
Intangible assets include a company's goodwill, copyrights
and trademarks, development costs, patents, mailing lists
and catalogs, treasury stock, formulas and processes,
organization costs and research and development costs.
D. DEPRECIATION
Is a method of applying the matching or accruals concept to
the cost of non-current assets.
The reductions are considered a cost of doing business and
are called depreciation expense. Normally, the accounting
procedure is to list the fixed asset cost on the balance sheet
less accumulated depreciation.
In essence, depreciation involves allocating the cost of the
fixed asset (less any residual value) over its useful life. To

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 calculate the depreciation charge for an accounting period,
the following factors are relevant:
- The cost of the fixed asset;
- The (estimated) useful life of the asset;
- The (estimated) residual value of the asset.
1.2.4.2. LIABILITIES
Are the contributions of creditors, debts or obligations incurred by our
company for purchases of merchandise or other goods and services.
1.2.4.2.1. CURRENT LIABILITIES
Are the contributions from creditors who constitute debts or
obligations that we me¡ in the short term (less than one year),
current liabilities are composed of suppliers, notes payable,
sundry creditors, the current liabilities feature is that they are
obligations we must meet the short term. The order that such
person must carry is determined by its greater or lesser degree
of enforceability.
1.2.4.2.2. FIXED LIABILITIES
Are classified contributions from creditors who constitute debts
or obligations that our company must meet the long term (after
one year).
This is integrated with the concepts of notes payable, mortgage
lenders, the feature is fixed liabilities are obligations that must
be carried in subsequent accounting periods. These are
arranged in view of their greater or lesser term to be met.
1.2.4.2.3. DEFERRED LIABILITIES
Are the contributions from creditors who constitute debts or
obligations that our company must comply with the delivery of
goods or the provision of services, it is composed of advances
received from customers, income received in advance, interest
collected in advance . The feature is that as they deliver the
goods or services involved are provided, they become
products. These are arranged in view of their greater or lesser
extent.

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1.2.4.3. HERITAGE
Is the account that represents the contributions of the owner or owners to
establish the company and includes the profits and reserves.
Mathematically, it is estimated by the difference between assets and
liabilities.
Heritage is considered all the assets and rights belonging to a natural
person or legal
Property: physical objects owned by the company for example:
Goods, furniture and money
Rights: These are debts that other people have with the company
and also patent rights trademark etc.
1.2.4.3.1. HERITAGE FEATURES
It consists of the initial contribution and additional contribution
from the owners of the company.
Increase in profits and losses decreases with the accounting
year.
• Represents the resources invested by the owners of the
Company.
• It is equal to total assets minus total liabilities.
• The right of the owners of the company is a residual
claim that the rights of creditors have priority from the
legal standpoint.
• Contributions made by the owner.
• Profit from operations of the business.
• The decrease in equity in a company originates in two
ways
• Withdrawals of money and other assets by the owners of
the company.
• losses from unprofitable operations of the company.
This segment also reflects the results achieved by the
management entity, is the gain or loss realized in a given
accounting year, as well as reserves and the results of
previous years.
members' shares to offset losses
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 CHAPTER II

EXAMPLE OF BALANCE SHEET OF THE AKAL GROUP S.A.A.

Set out below is a summarised balance sheet for Akal Group S.A.A. to illustrate the main
elements of the balance sheet.

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 AKAL GROUP SAA
BALANCE SHEET
As at 30 November 2010
(in thousands of new soles)

ASSETS LIABILITIES
Current Assets Current Liabilities
Cash 18,000 Trade Payables 12,000
Trade Accounts Receivable (net) 54,000
Other Assets 0 Total Current Liabilities 12,000

Total Current Assets 72,000 Non Current Liabilities

Financial Obligations 35,000
Non Current Assets
Property, Plant and Equipment (net) 34,000 Total Non Current Liabilities 35,000
TOTAL LIABILITIES 47,000

Total Non Current Assets 34,000 EQUITY

Capital 34,000
Earnings 25,000
TOTAL EQUITY 59,000

TOTAL ASSETS 106,000 TOTAL LIABILITIES AND EQUITY 106,000

COUNTER LEGAL REPRESENTATIVE

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Ilustración 1: Balance Sheet Model

Ilustración 2: Balance Sheet with Numbers

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 CONCLUSIONS

The company's balance sheet shows good returns, achieving a trust for the debts
of the year and has a good future for the next year.

All liabilities and the owner’s equity are totaled. This total should equal the total
assets. Assets = Liabilities + Capital.

The balance sheet is important because it shows investors, bankers, and owners if
your business can met its financial obligations; if you have taken on too much
debt, what assets your business has bought; and how much has been invested in
your business.

The income statement shows how well or badly you have done and the accounting
balance statement shows what the future of your business.

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 GLOSSARY
1. Net Working Capital = Current assets - Current liabilities
2. Liquidity: ability to the ability to quickly and cheaply turn an asset into
cash. More liquid assets are listed near the top of the assets.
3. Leverage: The idea that a little change can result in a larger overall
change. (think of a lever). In business it can be one of two types: operating
leverage (generally associated with high fixed costs and a capital intensive
business) and financial leverage (associated with debt).
4. Audit: a careful review of financial records to verify their accuracy.
5. Cash flow: the amount of actual cash generated by business operations,
which usually differs from profits shown.
6. Inventory: the supply or stock of goods and products that a company has
for sale. A manufacturer may have three kinds of inventory: raw materials
waiting to be converted into goods, work in process, and finished goods
ready for sale.
7. Net worth: total assets minus total liabilities. Net worth is seldom the true
value of a company.
8. Opportunity cost: a useful concept in evaluating alternate opportunities. If
you choose alternative A, you cannot choose B, C, or D. What is the cost or
loss of profit of not choosing B, C, or D? This cost or loss of profit is the
opportunity cost of alternative A. In personal life you may buy a car instead
of taking a European vacation. The opportunity cost of buying the car is the
loss of the enjoyment of the vacation.
9. Stock: a certificate (or electronic or other record) that indicates ownership
of a portion of a corporation; a share of stock, Stock also means the stock
of goods, the stock on hand, the inventory of a company.
10. Working capital: current assets minus current liabilities. In most
businesses the major components of working capital are cash, accounts
receivable, and inventory minus accounts payable. As a business grows it
will have larger accounts receivable and more inventory. Thus the need for
working capital will increase.

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 BIBLIOGRAPHY
 CALAMEO. Balance of walt disney.[ Internet site]. Available at:
http://es.calameo.com/read/00039703382a6a0c48675
Accessed: December 4, 2010
 WIKISPACES. The Balance Sheet Format. [Internet site]. Available at:
http://mrburt.wikispaces.com/The+Balance+Sheet
Accessed: December 7, 2010

 Preparing A Balance Sheet.[ Internet site]. Available at:

http://www.va-
interactive.com/inbusiness/editorial/finance/intemp/balance.html
Accessed: December 5, 2010

 BUSSINESS TOWN.COM. Basic Accounting.[ Internet site]. Available at:

http://www.businesstown.com/accounting/basic-sheets.asp
Accessed: December 5, 2010

 VERTEX42. Balance Sheet Template.[ Internet site]. Available at:

http://www.vertex42.com/ExcelTemplates/balance-sheet.html
Accessed: December 6, 2010

 BASICACCOUNTINGHELP. Accounting Balance Sheet.[ Internet site].

Available at:
http://www.basicaccountinghelp.com/accounting_balance_sheet.htmlAcces
sed: December 8, 2010
 INVESTOPEDIA. Introduction to the Balance Sheet.[ Internet site].
Available at:
http://www.investopedia.com/video/play/introduction-balance-sheet
http://www.moneyinstructor.com/lesson/accountingconceptslp.asp
http://www.accountz.com/glossary.html
Accessed: December 10, 2010

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