Balance-Sheet-–-Quickly-identifying-Questionable-Accounts

Balance Sheet – Quickly identifying Questionable Accounts

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If you are a business owner without any idea or working knowledge on the balance sheet reports, what reports to ask your accountant or bookkeeper for details and when is the time to raise your eyebrows on seeing the accounts and the amounts on balance sheet report.

First and foremost, you have to know what are asset, liability and equity accounts are.  One of the best ways to do this is to take up basic accounting lessons so that you will not be left at the mercy of your bookkeeper or accountant.  What’s more, you can also discuss and get to work together with your bookkeeper or accountant about the balance sheet and be able to recognize account items that need resolution. This way, you would have a good idea and understand the accounting terminology and the usage of accounts. A1 Business Pte Ltd sees the need to educate non-accounting business owners and managers to the basic accounting and complement your efforts to growing the business.

Outlined below is a sample Balance Sheet report.

Balance Sheet
Premium Company
As of December 31, 2015
Assets
   Bank
   ABC BankSGD 151.75
   XYZ Bank Checking AccountSGD 1,625.00
   CBA Savings AccountSGD 8,788.25
   Total BankSGD 10,565.00
   Current Assets
   Dummy Suspense AccountSGD 835.50
   Owner Loan A/C-SGD 5,000.00
   Petty Cash FundSGD 500.00
   InventorySGD 13,319.00
   Accounts ReceivableSGD 21,335.63
   Undeposited Funds AccountSGD 4,970.56
   Total Current AssetsSGD 35,960.69
   Fixed Assets
   Office EquipmentSGD 4,300.00
   Accumulated Depreciation – Office Equipment-SGD 4,526.00
   Total Fixed Assets-SGD 226.00
Total AssetsSGD 35,734.69
Liabilities
   Current Liabilities
   Accounts PayableSGD 9,862.50
   Sales TaxSGD 1,237.90
   Wages Payable – Payroll-SGD 1,278.00
   Accrued ExpensesSGD 2,189.00
   Total Current LiabilitiesSGD 12,011.40
   Non-Current Liabilities
   Loans PayableSGD 5,000.00
   Total Non-Current LiabilitiesSGD 5,000.00
Total LiabilitiesSGD 17,011.40
Equity
CapitalSGD 5,000.00
Net Income for the periodSGD 13,723.29
Total EquitySGD 18,723.29
Total Liabilities and EquitySGD 35,734.69

 

 

Based on the above details, a quick look of the accounts contained in the Balance should would call for you to ask more details or detailed report on the following accounts:

  • Current Assets – Dummy Suspense account of SGD835.50

Any dummy or suspense account should be closed or reconciled at the end of the month, especially in the end-of-year reports.  Suspense accounts are just temporary accounts that could be a real or profit and loss account.  This account is used as a last-recourse entry when the source of nature of the account is not yet identified.

  • Current Assets – Owner Loan A/C negative balance of SGD5,000.00

A receivable account has a normal debit balance side.  So, if this receivable account is negative, this could mean an overpayment from the owner for advances made or this could be an amount owed from the owner and is a company liability.  In this case, the account should be a current liability and not an asset presented as a negative account.

  • Current Assets – Undeposited Funds Account of SGD4,970.56

Watch out for the use of this undeposited funds account which could also mean undeposited checks or undeposited cash on hand.  Make sure that this amount accounts for the total deposits made on the very next banking day.

  • Fixed Assets – Office Equipment negative account of SGD226.00

Most often, a negative balance on any of the fixed assets account could mean over recording of depreciation.  In worse cases, the asset acquisition could have been unrecorded especially if the bank statements are not updated as to reconciliation.

  • Current Liabilities – Wages Payable negative amount of SGD1,278.00

A payable or liability account should always be a positive balance which is its normal balance side.  A negative liability account could mean an overpayment made to the account or if there is no overpayment, a result of misposting of account or erroneous account used.

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