The Balance Sheet

Practice questions
1. Identify each of the following items by writing one of the words – ASSET, LIABILITY, or
OWNER’S EQUITY – in the space provided.

a. A truck which the business owns __________________

b. A bank loan __________________

c. A building __________________

d. A mortgage __________________

e. Office supplies __________________

f. Assets minus liabilities __________________

g. A debt to a finance company __________________

h. Someone owes our company money __________________

i. Our company owes someone money __________________

j. Cash on hand __________________

k. Equipment __________________

l. The difference between total assets and total liabilities __________________

2. The fundamental accounting equation (A = L + OE) which means assets equal to liabilities
plus owner’s equity, can be rearranged in several ways to find whatever part is unknown.
Using this equation, calculate the unknown item in each of the following questions.

a. If assets are $209 436 and liabilities are $114 272, how much is owner’s equity?

b. If liabilities are $102 500 and equity is $93 000, what is the value of the company’s
assets?

c. If equity is $148 272 and total assets are $479 195, what amount represents total
liabilities?
3. Prepare a balance sheet for Kingston’s Pharmacy using today’s date. Assets include cash $10 410,
medical supplies $84 175, furniture $19 610, equipment $38 420, and building $125 000.
Liabilities include a bank loan $25 400 and a debt to Chemical Supply Co. of $5 810. The owner is
Frank Wallace.

4. Prepare a balance sheet for the Colonnade Restaurant, owned by Carman Pasquale, dated January
31, 20—. Assets include building $154 000, equipment $28 500, furniture $34 600, inventory $16
900, and cash $12 500. Liabilities include mortgage $60 000, Central Wholesales $9 450, and
bank loan $10 000. Note that in this question, both the assets and the liabilities must be
rearranged. The liabilities are placed in the order of the need to be paid – accounts payable first
and mortgage last.