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Journal Entries $type=three$count=6$author=hide$comment=hide$label=hide$date=hide$show=home$s=0

Balance Sheet $type=three$count=6$author=hide$comment=hide$label=hide$date=hide$show=home$s=0

How to Teach Balance Sheet

Just go to the classroom and solve one or two problems of preparing balance sheet may be the part of teaching of balance sheet but it is not complete steps of teaching of balance sheet. For teaching balance sheet, teachers should learn its all steps and use it in the classroom. Only then, their students will perfect in balance sheet.

Following are the main steps for teaching balance sheet :-

1st Step : To Learn Basics of Balance Sheet 

Accounting Equation is the base of balance sheet. Accounting teacher should teach the accounting equation. He should teach that assets will always equal to total liabilities. Every asset in business will create a new liability for year business. You have own money and you bought furniture for business with your money. You can say, you did not take loan for this. So, it will increase only your asset. Dear, your own invested money in business is also liability of business. It will be the part of capital. When other creditors will take their money. It may be the possible, you have to sell same furniture. At that time, you will also demand your capital from your business. So, business has also to pay your capital by selling same furniture.

In simple words, in this step, teacher will tell that balance sheet is nothing but list of assets and liabilities. One side, we show all the assets and other side, we will show all the liabilities. Total of assets will always equal to total of liabilities. Following is the formula of making balance sheet which we have taken from accounting equation.

Total Assets = Total Outside Liabilities + Total Capital

We take all the balances of assets and liabilities from ledger accounts.

2nd Step : To Teach the Balance Sheet of Different Companies 

Recently, I talked with one of my online friend which is professional accountant. Recently, he has to give interview in Deutsche Bank but he could not understand some items of the balance sheet of Deutsche Bank. You can understand its main reason. Teacher are just hurry to cover his or her syllabus. Whether it is B.Com class or MBA or CA Class, teacher should come from one syllabus book. Today, world is changing fastly. Teacher should first update from new balance sheet of different companies. Then, he or she should teach the different items of balance sheet of company ( take any company's current items). Today, we are explain some items of Deutsche Bank's balance Sheet.

1. Positive Market Values from ABC Derivative Financial Instruments

Derivative financial instruments are interest rate agreement and credit default swaps and future contracts for any asset buying or selling. Because this bank did this type of contract for reducing risk. Its positive market value will be asset and its negative market value will be liability. So, bank has shown positive market value of ABC derivative financial instruments. More detail of this instruments, you can read at here

2. Loans of Which 3 billion pounds were pledged to creditors and can be sold or re-pledged each year ending dec. 31, 2011 and 2010.

Bank has given loan. So, this will become fixed asset of bank. Now, same loan is used as security for getting loan from a creditor. 

3. Negative market value from derivative financial instruments

Derivative financial instruments are interest rate agreement and credit default swaps. Because this bank did this type of contract for reducing risk. Its positive market value will be asset and its negative market value will be liability. So, bank has shown it in the liability side. 

4. Non-controlling interests

In the balance sheet of Deutsche bank, non-controlling interests is showing in the liability side. It is not the outstanding interest on the loan taken by bank but it is the value of share capital which is not under the control of bank. You know that we are showing consolidated balance sheet. This balance sheet is the combination of holding companies liabilities and subsidiary company's liabilities. Actually, it is the liability of subsidiary company which it has to pay other investors. So, this minority interest will also show in the consolidated balance sheet of Deutsche bank. 

3rd Step : To Motivate Students to Learn the Effect of Balance Sheet of MNC on the Nation 

If teacher has to teach the balance sheet in real sense and get benefit from balance sheet, then teacher should motivate students to learn the effect of balance sheet of MNC on the nation. There are lots of items of balance sheet which affects any nation's economy. If teacher will succeed to motivate the students regarding this, he will surely succeed to teach balance sheet. For example, we take the example of Hindustan Unilever (MNC working in India) balance sheet. It started business in 1933 (before independence) with capital of Rs. 24 Lakh. Now, 2012's balance sheet shows its capital (Rs. 216 + 3464 = Rs. 3680) Crores capital. Now, compare the benefits of Hindustand Unilever for India. Whether it has given same benefits to India for increasing capital from 24 lakh to Rs. 3680 Crore or it has given disadvantages to India in the form of diseases, pollution and environment disasters. All most, all the MNC are speaking white lie through advertising. So, you should teach where students will check their investment in advertising. For example, in 1993-94, Hindustand liver invested Rs. 90 crore in advertising. Now, in 2012, it has invested in advertising Rs. 2696 crores. Teacher should make the list of all advertising and research whether all ads are true or not. 

 Because, capital is of MNC. So, when any MNC will go from any nation, it will take it. Every year, company has right to send is profit to head office which is the outflow of money from India(which is just reverse of foreign capital investment in India). Like this, you should make the list of all MNCs who are working in India. As per company law of India, it is must, they have to publish their balance sheet. Now, you have to understand first because you are teacher and then you have to teach the final result of their balance sheet to their students. 

( Main aim of this : Teacher is not just teacher. He is also citizen of any nation. He has to give benefit to nation from his knowledge, experience and skill. Teaching of balance sheet may open hidden facts. If these facts will understand new students, they can save their nation)


: 1
  1. excellent insight into the concept of B/S, but the writing skills need to improve.

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Accounting Education: How to Teach Balance Sheet
How to Teach Balance Sheet
Accounting Education
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