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A
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Liabilities
A company’s liabilities are its debts to suppliers, lenders,
bondholders, the tax authorities, etc. Current liabilities are debts that
have to be paid within a year, for example:
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creditors: money owed to
suppliers etc.
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overdrafts: when the company
spends more money than it has in its bank accounts.
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interest payments that have
to be paid in the short term.
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tax payable
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B
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Shareholders’
funds
When you
deduct a company’s liabilities (everything it owes) from its assets
(everything it owns), you are left with shareholders’ funds1. In
theory, that is what would be left for shareholders if the business stopped
operating, paid all its debts, obtained everything that was owed to it and
sold all its buildings and equipment.
Shareholders’
funds as shown in a company’s accounts includes:
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EXERCISES
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36.1
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This is the
other half of the balance sheet unit 35. Complete the assets table with
expressions from A and B opposite, and the relevant figures, using the
following information:
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Paradigm has a bank loan of
£20,000 to be repaid in three years.
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It has issued £100,000 worth
of shares.
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It has issued bonds for
£30,000 that it will have to repay in seven years.
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36.2
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Using
the information in B opposite and in the table above, decide if these statements
about Paradigm’s liabilities are true or false.
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1. The creditors item
includes debts that will have to be paid in two or three years.
2. Overdrafts are a form of
long-term loan.
3. In the coming year,
Paradigm will have to pay more tax than it pays out in interest on its
loans.
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