The Balance Sheet

1. The Balance Sheet Chapter 2

2. Questions Answered by Balance Sheet • Amount of Cash on Hand? • What is the Total Debt? • What is Funding Mix? • How Much is Owed to the Hotel?

3. Questions Answered by Balance Sheet • What are the Tax Liabilities? • Can Current Debt be Paid? • What is the Financial Strength? • How Much have Stockholders Invested in the Assets?

4. Uniform System of Accounts • Standardized Accounting System • Industry Driven • Basic Formats • Departmental Statement and Schedules

5. Uniform System of Accounts • Explanations and Discussions • Allows Comparison - Other Operations and Self • Can be Used by Any Size Operation • Property Level Designed Use

6. Balance Sheet Limitations • Does Not Reflect Current Values of Assets (Booked According to Cost Principle) • Does Not Include Some Things of Value Such as Personnel, Location, Customer Base, Goodwill

7. Balance Sheet Limitations • Becomes Quickly Outdated (static, not dynamic) • Some Account Balances are Estimates Such as Depreciation and Estimates for Uncollectibles

8. Balance Sheet - The Statement of Financial Position • Assets = Liabilities + Equity • Statement of Assets, Liabilities, and Owners’ Equity at a Point in Time

9. Balance Sheet - The Statement of Financial Position • Assets Current Assets Noncurrent Receivables Investments Property and Equipment Other Assets

10. Balance Sheet - The Statement of Financial Position • Liabilities Current Liabilities Long Term Debt Deferred Income Taxes Commitments / Contingencies Other Long-Term Liabilities

11. Balance Sheet - The Statement of Financial Position • Owners’ Equity Capital Stock Additional Paid In Capital Retained Earnings Treasury Stock

12. Balance Sheet Formats and Structure • Account Format - Assets on Left and Liabilities and Equity on Right (page 44) • Report Format - Assets First Followed by Liabilities and Equity (page 45)

13. Balance Sheet Formats and Structure • Current Assets - Converted to Cash or Used in Operation in One Year or Normal Operating Cycle • Listed in Order of Liquidity

14. Balance Sheet Formats and Structure • Cash (All Forms) • Marketable Securities • Receivables • Inventories • Prepaid Expenses

15. Noncurrent Assets • Noncurrent Receivables - not expected to be collected within one year - owners are shown separate • Investments - securities, land not in use, and affiliate advances not to be collected within one year

16. Noncurrent Assets • Property and Equipment - Fixed Assets, Capital Leases - Less accumulated depreciation • Smallwares - New USOA Recommends to Expense or Write off Over 3 Years

17. Noncurrent Assets • Other Assets - Deferred Charges, Security Deposits • Preopening Expenses - New USOA Recommends to Expense in Current Period

18. Other Assets • Goodwill • Cash Surrender Value of Life Insurance • Deferred Charges • Possibly Deferred Income Taxes

19. Balance Sheet Formats and Structure • Current Liabilities - Obligations expected to be Satisfied in One Year or Normal Operating Cycle

20. Current Liability Presentation • Payables • Advance Deposits • Current Maturities of Long Term Debts • Dividends Payable • Income Taxes Payable

21. Long Term Liabilities • Obligations Beyond One Year • Notes Payable • Mortgages Payable • Bonds Payable • Capitalized Lease Obligations • Possibly Deferred Income Taxes

22. Owners’ Equity • Preferred Stock, Par @ $$$ • Shares Authorized • Shares Issued • Common Stock, Par @ $$$ • Shares Authorized • Shares Issued

23. Owners’ Equity • Treasury Stock • Additional Paid in Capital • Retained Earnings

24. Owners’ Equity • Sole Proprietorship Capital • Partnership - Show Each Owner’s Capital • Withdrawal Accounts

25. Footnotes • Significant Accounting Policies • Accounts and Notes Receivable • Inventories • Investments

26. Footnotes • Property and Equipment • Current Liabilities • Long Term Debt • Capital Stock • Employee Benefit Plans

27. Footnotes • Leases • Segments of Business • Supplemental Financial Information • Commitment/Contingent Liability • Income Taxes

28. Balance Sheet Analysis • Comparative Statements or Horizontal Analysis • Compute Absolute Change (dollar difference) • Compute Relative Change (percentage difference) • Investigate Significant Differences • Internal Analysis

30. Balance Sheet Analysis • Common Size Statements or Vertical Analysis • Total Assets Equal 100% • Total Liabilities and Equity Equals 100% • Each Individual Account is Shown as a Percentage of the Total Assets • Compare to Industry, Like Businesses or Self

32. Balance Sheet Analysis • Base Year Comparisons • Series of Years • Compared to a Base Year