Question

Below is a draft balance sheet which Circular’s accountant is planning to fill in. Where would she put the following items?

a) A bank overdraft, repayable on demand

b) Twelve tonnes of pizza dough

c) A bank loan, repayable in five years

d) Invoices for payable from a supplier of garlic and tomato paste

e) Taxes for the current year payable in nine months’ time

f) An oven and two delivery bikes

g) A bill (unpaid) for pizzas delivered to a Christmas party

h) An order to purchase plant and equipment

Note that this is not a question on double-entry accounting. You simply need to tell me whether each item should be on the balance sheet and if yes where.

Balance Sheet

CURRENT ASSETS
Cash
Accounts Receivable
Inventory
LONG-TERM ASSETS
Plant and Machinery
CURRENT LIABILITIES
Bank Overdraft
Accounts Payable
Tax Payable
Dividends Payable
Other Payable
LONG TERM LIABILITIES
Bank Loan
NET ASSETS
SHAREHOLDERS’ EQUITY
Common Stock
Retained Earnings
TOTAL LIABILITIES AND EQUITY

Answer 1

Following items will be shown in the balance sheet by the accountant under following categories;

Items	Head in the balance sheet	Account Title
a) A bank overdraft, repayable on demand	Current liabilities	Bank overdraft
b) Twelve tonnes of pizza dough	Current Assets	Inventory
c) A bank loan, repayable in five years	Long-term liabilities	Bank Loan
d) Invoices for payable from a supplier of garlic and tomato paste	Current liabilities	Accounts payable
e) Taxes for the current year payable in nine months’ time	Current liabilities	Tax payable
f) An oven and two delivery bikes	Long-term assets	Plant and machinery
g) A bill (unpaid) for pizzas delivered to a Christmas party	Current assets	Accounts Receivable
h) An order to purchase plant and equipment	No recording	No Recording