GCSE Business Studies Revision: Balance sheet (statement of financial position) (With Mock Questions!)
Hello, brilliant students! 👋
Let’s talk about the Balance Sheet (also known as the Statement of Financial Position)—one of the most important financial documents in business. Understanding this will help you analyze the financial health of any business and is key to doing well in your GCSE Business Studies exam. Ready to dive in? Let’s go! 💪💡
What is a Balance Sheet? 🤔
A Balance Sheet gives a snapshot of a business’s financial position at a specific point in time. It shows what the business owns (its assets), what it owes (its liabilities), and the equity (the owner’s share in the business).
The balance sheet is split into three sections:
- Assets: Things of value the business owns, like cash, inventory, and property.
- Liabilities: The debts and obligations of the business, such as loans and money owed to suppliers.
- Equity: The owner's investment or retained profits—what’s left after liabilities are subtracted from assets.
Key Learning Items 📚
Here’s what you need to focus on:
✅ Assets - There are two types of assets:
- Current Assets: Cash, stock, and other assets that are expected to be used or turned into cash within a year.
- Non-current Assets: Long-term assets like buildings, machinery, and vehicles that the business uses over several years.
✅ Liabilities - These are also split into two:
- Current Liabilities: Debts that need to be paid within a year, like supplier bills and short-term loans.
- Non-current Liabilities: Long-term debts such as mortgages and bank loans that are paid over several years.
✅ Equity - This represents the owner’s stake in the business, also known as shareholder equity. It includes any money invested in the business and profits that have been kept (retained profits).
✅ Balance Sheet Formula - The balance sheet always balances using this formula: Assets = Liabilities + Equity
What You Need to Demonstrate 📝
In your exam, make sure you can:
✍️ Define assets, liabilities, and equity, and explain how they are shown on the balance sheet.
✍️ Understand the difference between current and non-current assets and liabilities.
✍️ Discuss the importance of the balance sheet for understanding a business’s financial health.
✍️ Explain how businesses use the balance sheet to make financial decisions and track progress over time.
Key Things to Remember Before the Exam! 🧠
🔑 Assets = Liabilities + Equity - This formula is key! The balance sheet must always balance.
🔑 Current vs. Non-current - Be clear on which assets and liabilities are short-term (current) and which are long-term (non-current).
🔑 Financial Health - The balance sheet helps businesses see if they have enough assets to cover their liabilities and remain financially stable.
🔑 Stay Focused and Confident - This topic can seem tricky, but you’ve got this! Take your time and think through the sections carefully. 😊
Mock Questions for You! 🎯
Q1 - Which of the following is found in eukaryotic cells but not in prokaryotic cells?
a) Ribosome
b) Nucleus
c) Cell membrane
d) DNA
Q2 - What does the balance sheet show?
a) The profits and losses of a business over time
b) The financial position of a business at a specific point in time
c) The cash flow in and out of the business
d) The amount of tax the business has to pay
Q3 - What is an example of a non-current asset?
a) Cash
b) Inventory
c) Machinery
d) Accounts payable
Q4 - How is equity calculated on a balance sheet?
a) Assets - Liabilities
b) Assets + Liabilities
c) Liabilities ÷ Assets
d) Revenue - Costs
Q5 - Which of the following is considered a current liability?
a) Mortgage
b) Accounts payable (money owed to suppliers)
c) Company vehicles
d) Retained profits
See more questions in our full Q&A Business Studies Booklet
You’re doing an awesome job! Keep practicing, and soon you’ll be an expert in understanding the balance sheet and how it helps businesses make important decisions. Keep going strong, and remember—you’ve got this! 🌟📚 Good luck, and keep up the great work! 🙌