(a) Define the term balance sheet. (b) The... | WAEC SSCE - Agricultural Science - 2013 (Essay)

Question 1 Report

(a) Define the term balance sheet.

(b) The financial data of Omega Dairy Farms Ltd as at December 31st 2012 are shown below:

Cash at bank	200,000.00
Cash in hand	70,000.00
Dairy cattle	5,000.000.00
Milk	300,000.00
Loans	3,000,000.00
Initial capital	4,000,000,00
Interest on loan payable	600,000.00
Account receivable	1,000,000.00
Taxes payable	500,000.00
Milking machine	1,500,000.00
Animal feed	100,000.00

Use the data to prepare a balance sheet for Omega Dairy Farms Ltd as at December 31st 2012 (c) State two ways in which the balance sheet is important (d) Is the farm credit-worthy? Give a reason for your answer

Answer

(a) Balance sheet

A balance sheet is a financial statement that shows the assets, liabilities and capital (net worth) of a business at a particular date.

(b) Balance Sheet of Omega Dairy Farms Ltd as at 31st December, 2012

Liabilities and Capital	Amount (N)	Assets	Amount (N)
Loans	3,000,000.00	Dairy cattle	5,000,000.00
Interest on loan payable	600,000.00	Milking machine	1,500,000.00
Taxes payable	500,000.00	Account receivable	1,000,000.00
Initial capital	4,000,000.00	Milk	300,000.00
Add: Net profit	70,000.00	Cash at bank	200,000.00
		Animal feed	100,000.00
		Cash in hand	70,000.00
Total	8,170,000.00	Total	8,170,000.00

Total assets = N8,170,000.00. Liabilities (loan, interest, taxes) = N4,100,000.00. Net profit (balancing figure) = Total assets - liabilities - initial capital = 8,170,000 - 4,100,000 - 4,000,000 = N70,000.00.

(c) Two ways the balance sheet is important

It shows the financial position (net worth) and solvency of the business at a given date.
It is used to assess the creditworthiness of the farm and aids planning and decision-making.

(d) Is the farm credit-worthy?

Yes. The total assets (N8,170,000.00) far exceed the total liabilities (N4,100,000.00), so the farm is solvent, has a positive net worth and can meet its debt obligations. It also made a net profit for the period.

Read lesson note on Farm Management (JAMB)

Answer Details

(a) Balance sheet

A balance sheet is a financial statement that shows the assets, liabilities and capital (net worth) of a business at a particular date.

(b) Balance Sheet of Omega Dairy Farms Ltd as at 31st December, 2012

Liabilities and Capital	Amount (N)	Assets	Amount (N)
Loans	3,000,000.00	Dairy cattle	5,000,000.00
Interest on loan payable	600,000.00	Milking machine	1,500,000.00
Taxes payable	500,000.00	Account receivable	1,000,000.00
Initial capital	4,000,000.00	Milk	300,000.00
Add: Net profit	70,000.00	Cash at bank	200,000.00
		Animal feed	100,000.00
		Cash in hand	70,000.00
Total	8,170,000.00	Total	8,170,000.00

(c) Two ways the balance sheet is important

It shows the financial position (net worth) and solvency of the business at a given date.
It is used to assess the creditworthiness of the farm and aids planning and decision-making.

(d) Is the farm credit-worthy?

Read lesson note on Farm Management (JAMB)

Farm Management

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(a) Define the term balance sheet. (b) The financial data of Omega Dairy Farms Ltd as at December 31st 2012 are shown below: Cash at bank 200,000.00 Cash in...

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(a) Define the term balance sheet. (b) The financial data of Omega Dairy Farms Ltd as at December 31st 2012 are shown below: Cash at bank 200,000.00 Cash in...

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