Prepared By:-
Module 1
Reading Through Financial
Statements: Balance Sheet
May 2025
About the Instructor
Faisal Mahmud Sajeeb, FCA
Current Position Founder of Accfintax
14+ years of experience in Corporate Governance, Financial Reporting, Business and
Field of Expertise
Financial Planning, Risk Management, Tax and VAT Management
Served in senior management roles in various organizations, including Golden Harvest
Job Experience and MJ Abedin & Co. Chartered Accountants, before starting his own Financial
Management and BPO Services firm
• Fellow Chartered Accountant of The Institute of Chartered Accountants of
Education Bangladesh (ICAB)
• BBA and MBA in Finance from North South University
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What is a Balance Sheet?
Cash & Bank Balance
A financial statement that shows Accounts Receivable
Inventories
Total Current Assets
Land & Equipment
❑ Assets (what the company owns) Vehicles & Machinery
Total Fixed Assets
❑ Liabilities (what the company owes,) Total Assets
❑ Equity (the owner's or shareholders' Accounts Payable (Suppliers)
Short-term Loan
stake in the company after liabilities are Total Current Liabilities
Long-term Loan
subtracted from assets) Total Non-Current Liabilities
Total Liabilities
Share Capital
It provides a snapshot of the company’s financial Retained Earnings
position at a specific point in time Total Shareholders’ Equity
Total Liabilities and Shareholders’ Equity
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A Simple Balance Sheet
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Current Assets
Current assets are the assets that can be converted into cash within a year. Cash
is the most Liquid asset.
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Current Assets
Cash and Cash Equivalent:
Cash is the most liquid asset and cash equivalents are the assets that can be quickly converted into cash.
Cash is calculated in the Cash flow statement.
Cash in Hand Cash in Bank
Accounts Receivable:
Does a company receive cash for every sale they made? No. The amount of revenue that the customers owe
to the company even after they received the product or service is accounts receivable.
Inventory:
Inventory refers to the raw materials used in production as well as the goods produced that are available for sale.
Other Current Assets:
Assets that can be converted to cash within a year but are not common or significant enough to be categorized as
cash, securities, inventory, or other typical current assets.
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Current Assets
Example
• AgriGreen Ltd. has BDT 10,00,000 in cash at
hand (most liquid form).
• The company also has BDT 778,612 in Bank.
Current Assets
Cash & Bank Balance 1,778,612 From the BDT 3,350,000 in revenue for AgriGreen
Accounts Receivable 300,000 Ltd. the customer paid BDT 3,000,000 in Cash
Inventory (Raw Materials) 125,000 and the remaining BDT 350,000 is yet to be paid.
Total Current Assets 2,203,612
BDT 1,520,000 worth of products have been sold
to customers. The remaining products worth BDT
125,000 is yet to be sold.
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Fixed Assets
Non-Current assets or fixed assets are long term investments of a company whose
values cannot be realized within 1 accounting year. They are highly illiquid and
cannot be easily converted to cash.
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Fixed Assets
Property, Plant and Equipment (PP&E):
These are physical long-term assets that are used to generate revenue. These assets are vital to business
operations but cannot be converted to cash easily. Examples of PP&E include:
Land Buildings Machinery Vehicles Furniture
Intangible Assets
These are non-physical assets which can be created or acquired by businesses. Intangible assets may be
definite or indefinite depending on the nature of the asset.
Software
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Fixed Assets
Example
➢ AgriGreen Ltd. has a piece of land worth BDT
500,000.
➢ They have an office building worth BDT
100,000.
Product Company: AgriGreen Ltd ➢ They also have farming equipment worth BDT
1,200,000
Fixed Assets
Land & Equipment 1,800,000
Vehicles & Machinery (+) 300,000
Total Fixed Assets 2,100,000
➢ AgriGreen Ltd currently owns 2 tractors worth
BDT 200,000.
Service Company: Agro Cold Storage Ltd ➢ They also have various machineries to
Fixed Assets process their products worth BDT 100,000
Land & Equipment 550,000
Vehicles & Machinery (+) 1,250,000
Total Fixed Assets 2,100,000
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Depreciation & Amortization
Suppose you purchase a Smartphone today for BDT 100,000. Do you think you can sell the phone at
the same price after a year?
The answer is NO. The value will be less than what it is today.
In this case the value of that smartphone might in BDT 90,000. In accounting term, the Smartphone’s
value Depreciated by BDT 10,000
Depreciation is an accounting practice which is used to spread the value of any tangible assets
across its useful life. It represents the value of the assets that have been used up.
Amortization is similar to depreciation, but it is used for Intangible assets.
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Depreciation & Amortization
AgriGreen Ltd. has bought an asset worth BDT 1,000,000. The useful life of the asset is 5 years. What are the
depreciation expense of each year?
Beginning Asset Value Useful Life
BDT 1,000,000 5 years
Year 1 Year 2 Year 3 Year 4 Year 5
Asset Value Asset Value Asset Value Asset Value Asset Value
BDT 1,000,000 BDT 800,000 BDT 600,000 BDT 400,000 BDT 200,000
Depreciation Expense Depreciation Expense Depreciation Expense Depreciation Expense Depreciation Expense
BDT 200,000 BDT 200,000 BDT 200,000 BDT 200,000 BDT 200,000
Here, the asset value is spread across the 5 useful years as depreciation expense. At the end of 5 years, the asset
value will be BDT 0
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Depreciation through the Statements
Income Statement Balance Sheet Cash Flow Statement
Depreciation has no
Fixed Assets effect on the Cash flow
Depreciation Expense statement since it’s a
as Part of Operating non-cash expense which
Expense cannot be attributed to
any cash inflow or
Depreciation Expense outflow
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Current Liabilities
➢ These are debts or obligations that the company must pay within the next year.
➢ They include short-term financial commitments like bills, loans, or other
expenses due soon.
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Current Liabilities
Accounts Payable (Suppliers)
▪ Money the company owes to its suppliers for goods or services purchased on credit.
▪ It’s a short-term obligation, usually due within 30 to 90 days.
Short-term Loan
▪ A loan that the company must repay within the next year.
▪ It’s often used to cover immediate cash needs or operational expenses.
Example
Service Company: Agro Cold Storage Ltd Product Company: AgriGreen Ltd
Current Liabilities Current Liabilities
Accounts Payable (Suppliers) 50,000 Accounts Payable (Suppliers) 200,000
Short-term Loan (+) 550,000 Short-term Loan (+) 150,000
Total Current Liabilities 600,000 Total Current Liabilities 350,000
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Long-term Liabilities
➢ Long-term liabilities or debt are those obligations on a company's books that
are not due within the next 12 months.
➢ They typically include loans, bonds, or other financial obligations with a
repayment period of more than one year.
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Long-term Liabilities
Long-term loan
▪ A loan that the company borrows and agrees to repay over a period longer than one year.
Example
AgriGreen Ltd. had taken a BDT 100,000 loan which has Long-term Liabilities
to be paid in 5 years and has an interest rate of 10%.
Long-term Loan 100,000
Since, the loan TENOR is 5 years, it is a long-term liability
for the company. Total Long-term Liabilities 100,000
Agro Cold Storage. had taken a BDT 250,000 loan which Long-term Liabilities
has to be paid in 10 years and has an interest rate of
Long-term Loan 250,000
12%. Since, the loan TENOR is 10 years, it is a long-term
liability for the company. Total Long-term Liabilities 250,000
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Shareholders’ Equity
➢ Shareholders' Equity represents the owners' claim on the company after all
debts and liabilities are paid
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Shareholders’ Equity
Share Capital
▪ The money a company raises by issuing shares of common stock
▪ It’s the total value of shares sold to shareholders, reflecting their ownership stake in the company.
Retained Earnings
▪ Represents the company’s cumulative profits that have been kept (retained) over time.
▪ It grows when the company makes a profit and shrinks if the company pays dividends or incurs losses.
Example
Shareholders
Retained Earnings
Equity
Net Profit
Shareholder’s Equity
Share Capital 300,000
Dividends Retained Earnings 2,533,613
Total Shareholders’ Equity 2,833,613
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Significance of Different Balance Sheet Items
Cash & Bank Balance
Accounts Receivable
Inventories Accounts Receivable:
Total Current Assets High accounts receivable means that the company is not
Land & Equipment getting their revenue full in cash, which may bear the risk of
Vehicles & Machinery customers not paying the amount resulting in bad debt.
Total Fixed Assets
Total Assets Inventory:
High Inventory means that the company is not being able to
Accounts Payable (Suppliers)
Short-term Loan
sell off its goods which may result in products going past their
expiration dates.
Total Current Liabilities
Long-term Loan
Total Non-Current Liabilities Accounts Payable:
Total Liabilities High accounts payable denotes that the company is delaying
on payments to its suppliers increasing the amount of money
Share Capital owed to the company.
Retained Earnings
Total Shareholders’ Equity
Total Liabilities and Shareholders’ Equity
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Thank You
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