Go Back   The Finance Forums > Finance forums > Homework



Homework Get help with your finance related homework.

Reply
 
Thread Tools
  #1  
Old 10-20-2010, 07:49 PM
marshall marshall is offline
Junior Member
 
Join Date: Oct 2010
Location: Victoria, Australia
Posts: 5
Default Getting the Balance Sheet to Balance!

Hi All,

Having a bit of meltdown presently as I am trying to prepare some financial projections for a subject at Uni.

I've done fairly well so far, but am having a drama getting the Balance Sheet to balance (that sounds like a private joke between accountants, doesn't it?), and I'm not sure where I'm going wrong!

As my professional network has not yet expanded to include any finance guru's I thought I would see any kindly souls in cyberspace could help me out.

I think the major issue I am having is with how to report the principle repayments due & long term debt as current & non-current liabilities.. So my questions are:

* Do you record principle repayments of long term debt as current L's?
* Do you then show (in non-current L's) the balance of the long term debt reduced by the principle repaid?

Or does this break some fundamental rule?

Any help would be greatly appreciated. Cheers.
Reply With Quote

Old Sponsors
  #2  
Old 10-20-2010, 10:13 PM
sapphirecapital's Avatar
sapphirecapital sapphirecapital is offline
Senior Member
 
Join Date: Sep 2007
Location: Montecito, CA, USA
Posts: 364
Default Re: Getting the Balance Sheet to Balance!

honestly, whenever I ran into trouble I found addition mistakes or number turns, fairly simple but difficult to find
__________________
Answers are for general information only and should not be construed or relied upon as legal or financial advice.

Reply With Quote

  #3  
Old 10-21-2010, 10:09 AM
ArcSine ArcSine is offline
Member
 
Join Date: Oct 2010
Location: North Carolina, USA
Posts: 89
Default Re: Getting the Balance Sheet to Balance!

I may not be interpreting your question correctly, but any debt repayments which occurred prior to the balance sheet date have simply reduced cash and debt by equal amounts; hence the balance sheet remains in balance.

For all debt balances which remain outstanding as of the balance sheet date, you'd classify as current liabilities that portion of the debt principal that'll be repaid in the subsequent 12 months. The remainder of the debt is classifed in the noncurrent bucket on the balance sheet.

Suppose for example that I have one loan outstanding on Dec 31. Its total remaining balance is 10,000. I'm repaying this debt at the rate of 500 per month, and there are obviously 20 monthly payments to go. (Note that this only considers the principal portion of the debt; the interest payments I'll be making play no role here.)

On my Dec 31 bal sheet I'll show 6,000 as a current liability (500 x 12) and 4,000 as a long-term debt (500 x 8).
Reply With Quote

  #4  
Old 10-22-2010, 08:17 AM
marshall marshall is offline
Junior Member
 
Join Date: Oct 2010
Location: Victoria, Australia
Posts: 5
Default Re: Getting the Balance Sheet to Balance!

Thanks very much to both of you for replying! I have actually found the issue - it was actually not to do with the principle repayments, yet that info will still be handy when I go to do that part of it, ArcSine, so cheers.

The problem was actually caused by some assumptions I made re: Days in Inventory. I had a cash outflow on the CFS referencing the COGS cell, whereas I needed to factor in the cash outflow for the extra 4 days in inventory (approx 13%), which balanced against the stock bought but not sold in that month (a current asset) so now it's all balancing perfectly!

To find the problem, I had to remove shrinkage which is now giving me a similar kind of grief as I try to re-add it:

Assuming that I will sell 10 units per day, and shrinkage is 2 per day, I would need to pay for 12 units (reducing cash balance). How do I reflect this on the E or L parts of the balance sheet? Is it a liability? Or, does equity get written down?

Cheers!
Reply With Quote

  #5  
Old 10-22-2010, 09:29 AM
marshall marshall is offline
Junior Member
 
Join Date: Oct 2010
Location: Victoria, Australia
Posts: 5
Default Re: Getting the Balance Sheet to Balance!

I just added shrinkage to COGS, and that seems to work ok. I suppose it is a cost of sales, but just wondering whether that's fundamentally wrong or whether it's GAAP-ok?!

Cheers.
Reply With Quote

  #6  
Old 03-11-2011, 05:24 AM
DorothyHick DorothyHick is offline
Junior Member
 
Join Date: Mar 2011
Posts: 5
Default Re: Getting the Balance Sheet to Balance!

really useful post for me thanks
Reply With Quote

Reply

Thread Tools

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off



» Boards




All times are GMT -4. The time now is 08:32 AM.


Powered by vBulletin® Version 3.8.5
Copyright ©2000 - 2018, Jelsoft Enterprises Ltd.