By Flora McArthur
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Additional info for A Taste of Gaelic
What has been learnt so far about entries in ledger accounts can be summarised for easy reference. Debit Any asset account 1 Opening value of that asset. 2 Increases in value of that asset. Debit Deductions in value of that asset. Any source of finance account Deductions in value of that source of finance. Credit Credit 1 Opening value of that source of finance. 2 Increase in value of that source of finance. 50 Practical Accounts 1 The amount that any asset is worth can be calculated at any time.
Capital was the only piece missing and it had to be the right size to give the picture its completeness. • The sources of finance are also shown in order of permanence with the most permanent finance (the proprietor's capital) coming first and the least permanent (the bank overdraft) last. While this is not essential for the accuracy of the balance sheet, it does fit in better with the assets side. It is considered to be good style. For this reason also it is worth making certain that the totals of the two sides of the balance sheet end up level with each other.
Thus the balance sheet totals £500 more on each side. On 6 July, Bill started selling and that day he did very well. He sold £300 worth of stock for £400. How did this affect his balance sheet? His stock was reduced in value by £300 but his cash increased by £400. It seems, on first thought, that the balance sheet would not then balance because the assets had increased by £100. However, it must be realised that this £100 represents Bill's profit to date. It is shown in the balance sheet by adding it to his capital.
A Taste of Gaelic by Flora McArthur