The Balance Sheet: A Practical Example & Explanation Financial Services Division
The Balance Sheet: A Practical Example & Explanation Financial Services Division
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Introduction...................................................................................................................... 6
1. Accumulated Funds...................................................................................................6
2. Non-Current Assets....................................................................................................6
3. Current Assets............................................................................................................7
4. Current Liabilities.......................................................................................................9
5. Non-Current Liabilities.............................................................................................11
6. Report Certification.....................................................................................................11
Balance Sheet Example
General Ledger
Balance Sheet Specific Period (GL21161S)
Current
Represented by:
Non-current Assets
Computers/IT Equipment >$5,000 10,000.00
Musical Equipment > $5,000 6,000.00
Other Assets > $5,000 7,506.36
23,506.36 Historical cost of assets > $5,000. PAGE 6
Current Assets
High Yield Investment Account 108,000.00 Closing bank balances including unpresented
Official Account 98,000.00 cheques/deposits. PAGE 7
Accounts Receivable Control 24,000.00 Outstanding family charges & outstanding debtors
Sundry Debtors 50,000.00 eg hall hire PAGE 7.
Provision for Non Recoverable -8,000.00 Journal entry reflecting estimated non collection of
Family Charges Essential Student Learning Items and Optional
Items PAGE 8
273,243.10
Total Assets 296,749.46
Current Liabilities
Payroll Clearing Account -4,289.18 Holding accounts for the collection of current
Group Tax Clearing Account -1,126.97 period’s obligations. PAGE 9
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Balance Sheet V 2.4
Introduction
The Balance Sheet is an important document for schools using CASES21 Finance
(C21F). This document outlines the major accounts listed in the Balance Sheet and the
effect of transactions on each account. The document aims to provide a better
understanding of the purpose and the makeup of accounts presented in a school’s
Balance Sheet.
Negative figures on the report represent credit balances and positive figures represent
debit balances.
The “Last Year” figures do not change. They are the figures reported in C21 as at
31/12/20xx.
1. Accumulated Funds
This figure consists of:
• opening balances for assets and liabilities brought forward from the previous year
(31/12/20xx)
• movements during the month or year of assets and liabilities through processing
of accounting transactions
2. Non-Current Assets
The asset accounts (the 2XXXX series of accounts in the Chart of Accounts) shown here
are those accounts that relate to items that appear on a school’s Asset Register (all
Assets >$5,000). The amounts represent the historical cost of the asset (purchase
price). Note: As depreciation is not calculated as part of C21F.
Non-Current Asset amounts in the Balance Sheet will reflect the original
purchase price of an asset until the point in time when the asset is disposed.
This will result in an inflated value in a school’s Non-Current Assets and
Accumulated Funds.
Once the purchase of an asset is recorded on the C21F system, at its historical cost, the
relevant asset account is debited by the amount of the asset as seen in the following
example where a piece of furniture is purchased for $5,500. Accounts Payable is also
credited (Refer 4.2).
These balances are more useful figures than the bank account balances contained in
bank statements because they include the impact of all unpresented cheques and all
outstanding bank deposits receipted. The preparation of a Bank Reconciliation
Statement is the mechanism to bring agreement between the school’s and the bank’s
balance. For cash flow monitoring and decision making purposes, the various bank
account balances displayed in the Balance Sheet, provide a more accurate and
complete cash position compared to what appears on bank statements.
Accounts Receivable decreases when a family pays money to the school that is
relevant to a family invoice. The accounting effect of entering this receipt into C21F is a
decrease in Accounts Receivable as it reflects that the family no longer owes the money
to the school for the relevant invoice.
If a school wishes to reverse the original family invoice a credit note can be
entered. This will decrease Accounts Receivable and also decrease the
revenue on the Operating Statement. The amount of the decrease will be the
amount of the family invoice that is being reversed.
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Balance Sheet V 2.4
3.4 GST purchases (Reclaimable)
This account is the accumulated reclaimable GST paid by the school. The account acts
as a tax credit account. This account will increase when purchases are made throughout
the period. Each time a purchase (including GST) is made by the school a GST amount
is paid. That GST amount can be claimed back from the ATO. The account collects the
GST portion of the payment.
For example: a typical purchase of a smartboard would create the following entries
The account is an asset account and along with GST on Sales, and other tax items, is
used to calculate the Business Activity Statement (BAS) refund or payment. The GST –
Purchases (Reclaimable) account is automatically calculated and cleared when
processing end of period BAS.
To recognise the expected uncollectable essential student learning items a journal must
be processed. The journal reduces the revenue for Essential Student Learning Items and
the Optional Items (a decrease in Revenue) and increase a Provision for Non-
Recoverable Family Charges (an increase in a negative Asset).
It is important to enter invoices when they are received as the commitment to pay that
amount is correctly reflected on the Balance Sheet and the GST can be claimed in a
timely manner.
Accounts Payable decreases when a creditor is actually paid. The accounting effect of
entering the payment in C21F is a decrease in Accounts Payable as it reflects that the
creditor is no longer owed any money (The liability has been reduced).
When Accounts Payable decreases, the school’s bank account (Official Account) will
also decrease (again this is because there are always two effects of a transaction in
double entry accounting). However the expense from the original invoice stays the same
on the Operating Statement.
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Balance Sheet V 2.4
4.2 Accounts Payable Control (continued)
If a school wishes to reverse the original creditor invoice entered in C21F a credit note
can be entered. This will decrease Accounts Payable and also decrease the expenditure
on the Operating Statement. The amount of the decrease will be the amount of the credit
note being entered. Using the Bob’s Plumbing example from earlier, if a credit note was
processed the following adjustments will occur:
Accounts
Debit (Dr)Payable
Credit Control
(Cr) (Liability) 200
It is important that a school reverses creditor invoices as soon as it is determined that they
will not be paid. This process ensures that the Accounts Payable figure more accurately
reflects the amount of creditor invoices that are awaiting payment. This also ensures that
expenditure on the School’s Operating Statement is not inflated.
Firstly, a journal entry is processed at the end of the school year to reverse the original
parent payments for Essential Student Learning Items and Optional Items revenue entered
in the system. This has the effect of decreasing Revenue in Advance liability account in the
Balance Sheet. The Revenue in Advance account is treated as a liability, as it is revenue
that the school has recognised without providing any services. The school has an
obligation to perform the services in the next school year.
Secondly, a reversal of this journal entry occurs at the beginning of the next school year.
This ensures that revenue is recognised in the correct school year. The reversal has the
effect of reinstating the original revenue amount in the Operating Statement and
eliminating the Revenue in Advance liability.
Revenue
10 in Advance (Liability) 5,000 The Balance Sheet V 2.4.
For example, students are invoiced a total of $880 (GST inclusive) for the food
component of a camp.
5. Non-Current Liabilities
Non-Current Liabilities are those liabilities that are not specifically related to the current
period, that is, they are debts that the school has to pay that span a timeframe greater
than the current accounting period. A Cooperative Loan account is the best example of a
Non Current Liability.
6. Report Certification
The parameters for the Balance Sheet include the option to print a certification page.
This should be printed for the final Balance Sheet at the end of period, signed and filed
for audit purposes.
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Balance Sheet V 2.4
Department of Education and Training
CASES21 Finance
http://www.education.vic.gov.au/school/principals/finance/Pages/cases21.aspx