Charlie's Balance Sheet

Recall that Charlie's beginning balance sheet looked like this:

Charlie's Beginning Balance Sheet

Cash	$ 2,200	Accounts payable	$ -
Accounts receivable
Raw materials and supplies	200
Finished goods inventory	-
Tools and equipment	600	Capital	3,000
Accumulated depreciation		Retained earnings
Total assets	3,000	Total liabilities and Equity	3,000

Thinking through the sources of the numbers for the closing balance sheet provides a good review of some of the steps in the budgeting cycle. Think through the answers and then click on the hyperlinks to check to see if you are correct.

Ending cash

The ending cash balance comes from the cash budget.

Accounts receivable

The accounts receivable balance comes from the cash receipts budget.

Raw materials inventory

The ending raw materials inventory balance comes from the production and purchases budget,

Accumulated depreciation

The balance in accumulated depreciation is the sum of the beginning balance [zero in this case] plus any depreciation written off during the period. Note that there may be several depreciation accounts [e.g., equipment, buildings, vehicles, etc.].

Retained earnings

The ending balance in retained earnings is the sum of the beginning balance in retained earnings plus any net income for the period [or minus any losses for the period].

Putting it all together, Charlie's 12/31/X1 balance sheet will look like this: The accounts receivable balance comes from the cash receipts budget.

Charlie's Balance Sheet, End of year 1

Cash	$ 509	Accounts payable
Accounts receivable	$ 325
Raw materials and supplies	126
Finished goods inventory	-
Tools and equipment	600	Capital	3,000
Accumulated depreciation	(120)	Retained earnings	(1,560)
Total assets	1,440	Total liabilities and Equity	1,440

This completes the master budget cycle. For a summary of this process, click next.

Copyright © 2004 Gerald M. Myers. All rights reserved. This site has been developed as aid to instructors and students in managerial accounting. The scenarios contained herein are not intended to reflect effective or ineffective handling of managerial situations. Any resemblance to existing organizations is purely coincidental.

Last modified: August 03, 2005