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Problem 2.3* Note that this suggested solution may also be downloaded from the student resources section the textbook website: .au/title/9780170178211 PSM Limited Balance sheet as at 30 June 2009 $000 Current Assets Cash 11,636 Accounts receivable 47,515 Inventory 66,479 Prepayments 3,958 Investments 3,371 132,959 Non-current assets Other receivable 361 Investments 2,087 Property, plant and equipment 67,760 Other long term assets 42,742 112,950 Total assets 245,909 Current liabilities Accounts payable 43,091 Provisions for employee entitlements 30,919 74,010 Non-current liabilities Long-term borrowings 30,866 Provisions for employee entitlements 3,969 34,835 Total liabilities 108,845 Net assets 137,064 Shareholders’ equity Share capital 108,518 Retained profits 28,546 Total shareholders’ equity 137,064  Problem 2.5 1 The idea of ‘balancing’ the accounting figures arose hundreds of years ago. Recording each transaction twice provided some arithmetic control over the records, because the two sides of the records should be equal. That probably doesn’t matter as much nowadays, with more accurate recordkeeping, including computers to keep track of amounts, but still sometimes errors are discovered because the figures don’t balance. Perhaps more importantly today, the balanced balance sheet shows how all of your resources (assets) have been financed. Assets may be financed by your own contributions, profits that have been retained in the business or from various types of borrowings. If the balance sheet did not balance, it would indicate a problem with this information and may lead to inappropriate decisions being made. 2 You have a point. The balance sheet is a historical statement: it reports the assets, liabilities and equity that have built up over time until the date of balance sheet. Such a