How The BALANCE SHEET Works (Statement of Financial Position / SOFP)
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- เผยแพร่เมื่อ 13 พ.ค. 2024
- 💥Balance Sheet Cheat Sheet → accountingstuff.com/shop
🖊Balance Sheet Practice Questions → accountingstuff.com/practice-...
The 'Balance Sheet', or 'Statement of Financial Position' (SoFP) is one of the three major Financial Statements, along with the Income Statement and the Statement of Cash Flows. In this tutorial, you'll find out what the Balance Sheet is and how to derive it using the basic principles of 'Double Entry Accounting'. Together we'll build our own Balance Sheet from scratch using six example transactions.
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⏱️TIMESTAMPS
00:00 - Intro
00:34 - Why the Balance Sheet is Important
01:42 - What a Balance Sheet Looks Like
02:16 - Balance Sheet Definition
02:40 - Rule: Assets = Liabilities + Equity
03:05 - Past vs Present
03:54 - Core Principle: Double-Entry Accounting
04:35 - The Basic Accounting Equation
04:58 - The Balance Sheet is a Snapshot
05:16 - How to Make a Balance Sheet
05:42 - Current Assets Definition
05:56 - Non-Current Assets Definition
06:15 - Current Liabilities Definition
06:28 - Non-Current Liabilities Definition
06:35 - Equity and Retained Earnings
07:28 - Balance Sheet Example
11:01 - Retained Earnings: Linking the Income Statement and the Balance Sheet
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🔗VIDEO LINKS
▪ Assets → • What are Assets? (Let'...
▪ Liabilities → • What Are Liabilities? ...
▪ Equity → • What Does Equity ACTUA...
▪ T Accounts → • T Accounts Explained S...
▪ Journal Entries → • How JOURNAL ENTRIES Wo...
▪ Trial Balance → • The TRIAL BALANCE Expl...
▪ Trial Balance vs Balance Sheet → • TRIAL BALANCE vs BALAN...
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I've had loads of requests for this one, so cheers for those! If you'd like a deeper explanation of some of the topics mentioned then here are the links...
▪ Trial Balance vs Balance Sheet → th-cam.com/video/q7Nhj8vDD8M/w-d-xo.html
The three components of the Balance Sheet:
▪ Assets → th-cam.com/video/rOsuqG_J0t4/w-d-xo.html
▪ Liabilities → th-cam.com/video/fKRwT10Sszc/w-d-xo.html
▪ Equity → th-cam.com/video/Fr5oHEYrT2A/w-d-xo.html
Support for the Worked Example:
▪ Transactions 1-5 are explained in detail in this video → th-cam.com/video/kA9snSvCgW8/w-d-xo.html
▪ Transaction 6 is explained in detail here → th-cam.com/video/Y-_Q3rANyxU/w-d-xo.html
▪ How to build a Trial Balance using ALL of the Example Transactions → th-cam.com/video/3_PfoTzSCQE/w-d-xo.html
Timestamps:
00:00 - Intro
00:34 - Why the Balance Sheet is Important
01:42 - What a Balance Sheet Looks Like
02:16 - Balance Sheet Definition
02:40 - Rule: Assets = Liabilities + Equity
03:05 - Past vs Present
03:54 - Core Principle: Double-Entry Accounting
04:35 - The Basic Accounting Equation
04:58 - The Balance Sheet is a Snapshot
05:16 - How to Make a Balance Sheet
05:42 - Current Assets Definition
05:56 - Non-Current Assets Definition
06:15 - Current Liabilities Definition
06:28 - Non-Current Liabilities Definition
06:35 - Equity and Retained Earnings
07:28 - Balance Sheet Example
11:01 - Retained Earnings: Linking the Income Statement and the Balance Sheet
So I'm just starting out with a basic accounting class this semester - Although this video helps, I still get REALLY lost. Specifically, how can I start to finally understand exactly where to record parts of a transaction, (ie: in transaction 4, how do you know to put $50 in both the Supplies and Accounts Payable sections?? Yes...the struggle is real!) Thanks for all the help! I'll definitely watch more of your videos - any specific recommendations?
Maggie Marsh hi Maggie. Since the balance sheet must always balance, i believe if you’re adding to one side (assets), you must add to the other (liabilities+equity) (Or you can add and minus to the same side eg buying $20 of equipment in cash). Since the business is paying $50 for supplies, they now have $50 worth of supplies so this goes under supplies under the assets section (on the left side). However, since the supplies weren’t paid in cash, we can’t credit cash by $50, but instead we credit accounts payable, which signifies that the business owes $50 to their supplier to be paid at a later date. Hope this answers your question.
I understand this more than reading every inch of my module. You're such a blessing in disguise 🥰
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Cheers for watching Lawrence, it's great to hear the videos are helping you. All the best with your studies!
I’ve been studying business for 5 years now and it always confused me that equity didn’t come under assets because I thought it was what the business owned. But now that it’s been worded as ‘what the business owes to the owners’ I understand. I’m kind of mind blown that it confused me for 5 years and now it’s been cleared up by a single sentence.
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Sometimes the owner use the money in the busines or vice versa. It happens.
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Glad you're finding these helpful!
I am doing an MBA currently and as I approach finals for this damn accounting course, I have learned more from these videos than all of the lecture videos I've watched.
Hell of a lot more informative than my university material. Thank you
Thanks! Hope it was useful :)
Hey,
I'm a first year student taking a course on accounting, and your videos are really helping me out atm. Even better than my professor's courses...
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I'm incredibly grateful for this. Accounting is one of my modules for uni and I have been struggling with constructing a balance sheet until I came across this video. This step-by-step video has helped profusely - thank you so much.
The best channel on TH-cam
Thanks buddy!
Thank you very much!
I'm still a high school student but I already learned how to understand and build income statements and balance sheets because of your very informative vids. I think I'll aspire to become an accountant someday, your videos helped me a lot on picking a nice course to get in college. Thank you very much and God Bless!
No worries Luis, it's great to hear that you're getting into accounting. All the best with your studies!
This made how balance sheets work so much easier to understand. The examples and explanations were a great help. Thank you!
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Congrats on your pass! No worries, I'm happy to help
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No problem!
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Thanks for your kind words :)
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Cheers Jose, hope it's making sense
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No worries Ryan, I'm happy the vids are helping you out!
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Great to hear it's clicking for you :)
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Cheers Damian!
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Thanks Kaijin! Cheers for your suggestion
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Cheers Leon, hope your wife found it helpful!
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Cheers Kristie, there are more on their way :)
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Hey Katie, if you're studying architecture then accounting will be a walk in the park for you. All the best!
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Thanks Cyndi!
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No worries Alyssa, good luck with your studies!
ABSOLUTELY LOVED IT....COULDN'T HAVE HAVE BEEN SIMPLER TO UNDERSTAND.....!!!!
Merci 😇
You've been one of the best resource for my accounting class this semester! Thank you! I still suck at understanding how it all works, but I'm able to do it (kind of) lol. Do you tutor online anywhere? If not, do you have any recommendations for other resources beyond your videos for a college student trying to survive their accounting tests?
Hey Hope! Unfortunately I don't offer any tutoring at this stage. The only resource that I recommend at the moment is 'The Accounting Game' which is a book for beginners. It's great to hear that you're figuring out how it works!
Thank you so much for videos like this. You’re making a difference to so many students out there ❤️
true dat
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Thanks for your kind words! All the best :)
made more sense after some time looking at what terms like "equity" and "retained earnings" thanks
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Thanks Neha, I'm glad you enjoyed it!
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Hey Keenan, yes I would like to cover that soon!
You already have it in the channel now!
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No worries Luis, it's great to hear that the videos are helping you with your studies! Good on you for choosing Accounting and Finance, they are very valuable skills to have
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3:08 when you're making your first 3 financial statements
This is really Excellent ! Thank you so much. I’m the volunteer treasurer of a small Residents Assn and have been trying to get my head around the balance sheet financial terminology and the balance sheet equation. I’ll set up a dummy balance sheet in Excel with the double columns and formulae and see how our finances will flow through it. Thanks again. I’ve subscribed!
Hey Christian, I'm glad you found the video helpful. Cheers for the sub! All the best with sorting out your Resident Association's Balance Sheet
So useful. Clear explanation and great use of simple examples.
can you please do an income statement
Thanks for your suggestion, I want to get that one done soon
*bottom right hand corner of the video* - "SUB?" Me: "Why yes, yes I am. What does that have to do with anyth- ohhhhhh."
It's a feature in YT called Channel Branding
@@AccountingStuff I know, I was making a (terrible) naughty joke. :P
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Cheers Jim! All the best :)
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You're most welcome :)
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Cheers mate, glad to hear that you're enjoying the content and thanks for the sub!
Super clear and concise demonstration for the link between Balance Sheets and Income Statements. Amazing!
Thanks buddy!
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Cheers Obi and thanks for the support!
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Best of luck with it all!
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Hey Adrienne, thanks for your kind words! I'm glad to hear that you're finding these helpful. Cheers for your support and all the best with your studies!
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No problem, happy to help :)
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Thank You so much.
Your videos are helping me get through
Financial Accounting
And so are these Wiley Videos and a Bookkeeping Class.
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No problem, best of luck with your studies!
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Cheers Salman! Glad you enjoyed it :)
You brighten up my day!!!!As I been struggling to understand my accounting course and all your videos are so helpful. Thank you so much.
No problem, all the best with your studies!
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Thanks for your kind words :)
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Hey Zee, great to hear you're feeling ready for the exam. Hope it goes well!
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No worries Shabab!
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Thanks Alex!!
Even for me that the English it's my second language and I continuing learning
You form to express it's very easy to understand and follow
Thank you so much
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Thanks Shrujanam!
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No worries, glad you found it useful
I am really impress with your teaching ,well done
im not good at math but when i watched it ur videos
. I would like to try know and study , understanding in bookkeeping. This is my subject bookkeeping in high school. Now i understand this bookkeeping , accounting. Thanks . From Phil.
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No worries Cindy!
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Cheers Amy! Thanks for your kind words :)
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Thanks Mark!
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No worries, hope it's all going well!
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No problem, thanks for watching!
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No problem Alex! All the best
Thank you Sir for the work, for all the hours put in, in order to realize this video!!
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I Have watched about 15 videos so far and you have helped me so much. Thank you
No worries, I'm happy to help!
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No worries Phumelele. Good luck, that is a daunting task but I'm sure you'll do fine! All the best
You are the king of accounting thank you my friend
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Well done budd
Thanks mate, glad you enjoyed it
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Cheers Emre, good luck with your course!
This video is amazing, I like the balance sheet creation and how you included profit and loss statement to make sense, amazing, it unlocked that missing link in my brain that the books or course I have been doing so far couldnt. You have saved my education as well. Good job! I really appreciate your videos, you got another big fan. Keep up the good work ;) And Thank you Loads
You're very welcome. I think it always helps to put the balance sheet in perspective using the income statement. Great to hear that it's making sense for you
This was soooooo helpful. Thank You!
This was SO good! But all your videos are amazing! Thank you! Thank you!
Glad you enjoyed it!