 Hello and welcome to the session. In this session we are going to discuss the following question and the question says that, Prepare a balance sheet for Dr. Lawson for the year ending December 2012 using the following information. Dr. Lawson has $30,000 cash, the cost of his furniture and equipment is $1,200 and $5,500 respectively. He pays annual tax of $3,500 and has a long term loan of $20,000. He has bonds of $6,000 to be paid and has outstanding wages of $3,000. He has made a short term investment of $8,000 and has prepaid salaries of $6,000. Now we know that the balance sheet calculates assets and liabilities. Now assets are the economic resources owned by the person or company. These are of two types. One is current assets and the other is non-current or fixed assets. Now current assets are those assets which are being used as cash or will be converted into cash within an year and non-current assets are those assets which cannot be converted or will not be converted into cash within an year. Thus total assets are given by current assets plus non-current assets and liabilities are the debts or the money which has to be paid to the creditors. These are also of two types current liabilities and long term liabilities. Now current liabilities are the payments which the company has to make within one year and long term liabilities are those payments which will be made by the company in the long run and not within one year. Thus total liabilities are given by current liabilities plus long term liabilities. Now using this key idea, now we will prepare Dr. Lawson's balance sheet showing assets and liabilities. In assets we will show both current and fixed assets and in liabilities we will show both current and long term liabilities. Let us first write the heading that is balance sheet year ending December 2012. Then we will make two columns, one showing assets and the other showing liabilities. Here we have divided assets column into two parts, one showing assets and the other showing amount in dollars. Similarly we have divided liabilities column into two parts, one showing liabilities and the other showing amount in dollars. Now first we will write current assets. We are given that Dr. Lawson has $30,000 cash so it is a current asset. Also we are given that he has made a short term investment of $8,000 and has prepaid salaries of $6,000. These are also current assets so we write all on columns as shown under current assets cash of $30,000, short term investment of $8,000 and prepaid salaries of $6,000. Now we write total current assets that is $30,000 plus $8,000 plus $6,000 which is equal to $44,000. Now we write non-current assets or fixed assets. We are given that the cost of his furniture and equipment is $1,200 and $5,500 respectively. So under the heading non-current assets we will write all on columns as shown that is furniture for $1,200 and equipment for $5,500. So total non-current assets are $1,200 plus $5,500 which is equal to $6,700. Now total assets will be given by total current assets plus total non-current assets. So total assets will be equal to $44,000 plus $6,700 that is equal to $50,700. So we write total assets as $15,700. Now we move to the Liabilities column. First we write all the columns as shown. We are given that Mr. Lawson pays annual tax of $3,500 which is a current liability. So we write tax as $3,500. Also there are outstanding wages of $3,000 which are also current liability. So we write outstanding wages of $3,000. So total current liabilities will be given by $3,500 plus $3,000 that is equal to $6,500. Now we will find long term liabilities. We are given that he has bonds of $6,000 and has a long term loan of $20,000. These are long term liabilities. So we write bonds as $6,000 and long term loan as $20,000. So now total long term liabilities will be given by $6,000 plus $20,000 which is equal to $26,000. So total liabilities will be given by total current liabilities plus total long term liabilities. So total liabilities will be equal to total current liabilities that is for $6,500 plus total long term liabilities that is for $26,000 and this will be equal to $32,500. So we write the total liabilities as $32,500. Thus this is the required balance sheet. This completes our session. Hope you enjoyed this session.