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4 min 18 sec
0:00
The corner bar returns
0:23
A photo on one day
0:40
Assets first
1:06
Then liabilities
1:41
It always balances
2:16
Closing the year
2:44
The balance sheet in Beeswax
3:18
Recap and quiz
Accounting 101
·
Reading the numbers
·
Episode 25
The Balance Sheet
(And closing the year.)
A photo of Northlight on the last day of the year. Walk through Maya's assets, liabilities and equity, find out where the profit went, and close the year.
balance sheet
retained earnings
year end
Transcript
0:00
Remember the little bar in the corner, from episode one? Assets, equals liabilities, plus equity. It's been quietly balancing all series. Today, it gets promoted.
0:13
Today: the balance sheet, and closing the year. Where everything is, on one particular day.
0:23
The profit and loss was a film of the year. The balance sheet is a photo, taken on one day. Here, the last day of Northlight's first year. What does the business own? What does it owe? And what's left over for Maya?
0:40
Assets first. The bank, eleven thousand, seven hundred and thirty. Trade debtors, sixty-four hundred, still to be paid. Prepaid software, nine hundred.
0:52
And the laptop. Cost, three thousand, less accumulated depreciation, one thousand. Two thousand, on the books. Total assets, twenty-one thousand and thirty.
1:06
Then liabilities. The loan, two thousand left to pay. Trade creditors, eleven fifty, Rowan's latest bill. Tax withheld and contributions for Priya, twelve eighty. And six hundred on the credit card. Total liabilities, five thousand and thirty.
1:27
Then equity. Maya's capital, ten thousand. This year's profit, thirty thousand. Less her drawings, twenty-four thousand. Total equity, sixteen thousand.
1:41
And now, the moment the corner bar has been waiting for. Twenty-one thousand and thirty in assets. Five thousand and thirty in liabilities, plus sixteen thousand in equity, is twenty-one thousand and thirty. It balances. It always balances.
1:59
It also solves last episode's mystery. Where did thirty thousand of profit go? Twenty-four thousand to Maya. Sixty-four hundred still sitting with clients. Some of it paid down the loan. Profit went everywhere, except the bank.
2:16
Then the year ends. Income and expenses only ever cover one year, so they start again from zero. But the profit doesn't vanish. It moves into retained earnings: all the profit the business has made and kept, since day one.
2:33
On the first day of year two, the profit and loss is empty. And the balance sheet shows thirty thousand of retained earnings, brought forward. That's closing the year.
2:44
In Beeswax, the balance sheet shows assets in blue, liabilities in red, and equity below. Pick any date, and you get the photo on that day.
2:54
You don't have to post a closing entry. Beeswax works out current year earnings for you, and carries earlier years' profit forward as retained earnings, straight from the ledger, every time.
3:07
And if the numbers ever don't tie up, it doesn't hide it. A discrepancy line appears, usually an opening balance entered outside a journal. Better to see it than to bury it.
3:18
So. The balance sheet is a photo, on one day. Assets equal liabilities plus equity, always. Profit flows into equity. And at year end, income and expenses start again, while the profit moves into retained earnings.
3:36
Quick one. Assets, fifty thousand. Liabilities, eighteen thousand. What's the equity? And if the year's profit was twelve thousand, and the owner drew five thousand, how much did equity grow?
3:51
Have a think.
3:54
Equity is thirty-two thousand. Fifty, minus eighteen. And it grew by seven thousand. Twelve in, five out.
4:04
The corner bar, for the record, has asked for a raise.
4:07
Next time: the final episode. Reading the numbers. Margins, cash, and whether Maya should raise her rates, or hire a second designer.