A Closer Look at the Balance Sheet
Welcome Message
In Conversation
Clever and Trigger have been a part of your journey in week 1. They share their excitement on understanding the basics of financial statements. Listen to a conversation between Clever and Trigger to understand why they are so excited about this week.
Introduction to Balance Sheet
In this session, you will understand in greater detail the format and structure of the balance sheet. You may have come across different formats of a balance sheet and may be intrigued by it.
What do we mean by assets? What are the different items that can be considered as assets?
For example, Intel had almost 107,000 employees worldwide as on December 2015. Are employees an asset to a company? Of course! they are. But, are they reflected in the balance sheet?
Like assets, what do we mean by liabilities? Are all liabilities supposed to be discharged immediately?
How is the business funded? Who does the funding? What is equity? Does it include only owner’s contribution to the business?
Let us now define the different terms associated with the balance sheet.
Watch the following video to get a basic understanding of the balance sheet and its elements, followed by a practical example under the unit "Unravel your Company".
Note: Enhance your knowledge on the topics covered so far. Move to the next unit, Unravel your Company and enrich yourself with the practical understanding of topics discussed in the lecture video(s).
Note: Enhance your knowledge on the topics covered so far. Move to the next unit, Unravel your Company and enrich yourself with the practical understanding of topics discussed in the lecture video(s).
Unravel Your Company
The following exercise is for your practice. There is no grades for this exercise .
Introduction to Non-Current Assets
In the preceding videos, we had defined the term assets, liabilities and equity in the balance sheet.
Broadly assets can be classified as non-current assets and current assets. Now let us get started with assets in detail.
What do we mean by non-current assets? Watch the following video to get a brief idea about non-current assets.
Property, Plant & Equipment (Video)
Practical Exposure to Balance Sheet and Non-Current Assets (Video)
Introduction to Current assets (Video)
Intangible Assets and other Non-Current Assets
You are fully fatigued and thirsty in summer. What’s the first thing that comes to your mind? Pepsi ! But why Pepsi? Is it because of its established brand name or is it because of the formula (patented)? Whatever be the reason, these are very valuable to Pepsi Co. Can we record them on the balance sheet as assets?
Think! Facebook acquired WhatsApp for around $20 billion. What assets did it have in the balance sheet to entail this valuation? What about the training cost? Do we include that as an intangible asset?
Businesses have to make advance payments to suppliers frequently. Some advances are made for a long period of time, say three to five years. How should this item be classified and reported in the balance sheet?
Watch the following video to understand how a brand, goodwill, other intangibles and non-current assets should be accounted for in the books.
Inventory(Video)
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