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In the balance sheet you enter all what you own, and all what you owe. The difference is called Net Capital. The Balance Sheet is an important part of the accounts, because errors influence directly on the period's result.
To make regular accounts for a period is needed Balance Sheets at beginning and at end. In the Balance Sheets you enter all what you own, and all, what you owe. The difference is called net capital (or net debt, if negative)
The Balance Sheet is an important part of any accounts: you can make accounts containing only of two Balance Sheets plus information of how much money paid to the owner. Then you can calculate the profit in this way:
The most simple sort of account |
|
Net Capital at end |
333211 |
- Net Capital at beginning |
-307374 |
+ Private consumption of the year |
+48424 |
= Surplus of the year |
= 74261 |
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In making out the Balance Sheet, you have several problems. What is the value of land, buildings, livestock, fertilizer in the fields, etc.?
Examples of errors in balance at end: The livestock is 10000 kroner too low, and stocks are 5000 kroner too low. The surplus from above will then be altered in this way:
Example 1 |
With error |
Without error |
Net Capital at end |
318211 |
333211 |
- Net Capital at beginning |
-307374 |
-307374 |
+ Private consumption of the year |
+ 48424 |
+ 48424 |
= Surplus of the year |
= 59261 |
= 74261 |
.
The surplus is lowered, because the assets are valued too low.
Another example: Error in both balance at beginning and balance at end. Value of livestock is 10000 kroner too low, and stocks are 5000 kroner too low.
Example 2 |
With error |
Without error |
Net Capital at end |
318211 |
333211 |
- Net Capital at beginning |
-292374 |
-307374 |
+ Private consumption of the year |
+ 48424 |
+ 48424 |
Surplus of the year |
= 74261 |
= 74261 |
.
When you make the same error at beginning and at end, the surplus will be unchanged -- but the balances are still wrong.
If you make up the values in an inaccurate way, it may influence the single year's result essentially
Balance at end of year 1 |
|
|
|
Assets |
|
Liabilities |
|
Real Estate |
655350 |
Mortgage debt |
381649 |
Machines |
61188 |
|
|
Livestock |
133250 |
Bank debt |
57821 |
Stock |
5250 |
Other debt |
114101 |
Securities |
11798 |
|
|
Car |
15876 |
|
|
Outstanding accounts |
2115 |
|
|
Cash |
1956 |
Net Capital |
333212 |
Sum |
886783 |
Sum |
886783 |
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The figures in the balances at the end of one year and at beginning of the next year are identical. That gives coherence between the different years
Balance at beginning of year 2 |
|
|
|
Assets |
|
Liabilities |
|
Real Estate |
655350 |
Mortgage debt |
381649 |
Machines |
61188 |
|
|
Livestock |
133250 |
Bank debt |
57821 |
Stock |
5250 |
Other debt |
114101 |
Securities |
11798 |
|
|
Car |
15876 |
|
|
Outstanding accounts |
2115 |
|
|
Cash |
1956 |
Net Capital |
333212 |
Sum |
886783 |
Sum |
886783 |
.
<<< | >>> | Chap. 1 | Chap. 2 | Chap. 3 | Chap. 4 | Chap. 5 | Chap. 6 | Chap. 7 |
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