Examining the Balance Sheet - Advanced

An Accounting and Finance Course

*This course can be tailored or customized to your specific needs.

Course Overview

Part two of this introduction to balance sheets explains how assets, liabilities, and owner’s equity are used to create the most accurate financial snapshot possible. Participants will be exposed to Cash-Based vs. Accrual-Based accounting methods while learning how to interpret Balance Sheets.

Objectives

  1. Understand the how the balance sheet is used to show a fiscal snapshot at one point in time
  2. Identify the advantages/disadvantages of utilizing a cash-based vs accrual-based accounting
  3. Demonstrate the importance of liquidity and solvency in a balance sheet

Lesson 1: Balance Sheet Utilization

  • Review how a balance sheet is utilized to summarize the financial status of the organization at a given point in time
  • Understand how to view the assets of an organization to which those assets were financed with borrowed money and with the owner’s money

Lesson 2: Effects Common Transactions Have on a Balance Sheet

  • Cash-Based vs. Accrual-Based Accounting
    • Cash-Based: Advantages and Disadvantages
    • Accrual-Based: Advantages and Disadvantages

Lesson 3: Interpreting Balance Sheets

  • Liquidity
    • Identify whether the organization has enough cash and current assets to pay its bills for the year
    • Calculate Current Ratio
  • Solvency
    • Measure your borrowing power to determine to finance economic expansion or to weather an economic downturn
    • Calculate Debt-to-Equity Ratio