Balance sheet is a snapshot of a company’s assets, liabilities, and owners’ equity at a specific point in time. The left-hand side of a balance sheet (or the top, depending on how it is displayed) shows a firm’s assets, while the right-hand side (or bottom) shows its liabilities and owners equity. The assets are listed in order of their “liquidity”, or the length of time it takes to convert them to cash. The liabilities are listed in the order in which they must be paid. A balance sheet must always “balance”, meaning that a firm’s assets must always equal its liabilities plus owners’ equity.
The major categories of assets listed on a balance sheet are the following:
- Current assets: current assets include cash plus items that are readily convertible to cash, such as accounts receivable, marketable securities, and inventories.
- Fixed assets: Fixed assets are used over a longer time frame, such as real estate, buildings, equipment, and furniture.
- Other assets: other assets are miscellaneous assets, including accumulated good will.
The major categories of liabilities listed on a balance sheet are the following:
- Current liabilities include obligations that are payable within a year, including accounts payable, accrued expenses, and the current portion of long-term debt.
- Long-term liabilities include notes or loans that are repayable beyond one year, including liabilities associated with purchasing real estate, buildings, and equipment.
- Owners’ equity is the invested in the business by its owners plus the accumulated earning retained by the business after paying dividends.
Balance sheet is the statement of a firm’s financial position—what it owns and claims against its assets—at a particular point in time.
Balance sheet is a list of the assets and liabilities of a bank (or firm) that balances: Total assets equal total liabilities plus capital.
Balance sheet is a financial statement that indicates a firm’s financial position at a particular moment in time; reflects a firm’s solvency or its ability to pay its debts as they come due. Also called a statement of financial position.
More from this Section
- Sales law
Sales law is the law governing the sale of goods or services for money or on credit. ...
- Elevator speech (or pitch)
Elevator speech (or pitch)– a brief, carefully constructed statement that outlines the ...
- Board of Directors
A board of directors is a panel of individuals elected by a corporation’s shareholders ...
- Frequency marketing
Frequency marketing is the marketing initiative that rewards frequent purchases with cash, ...
- Closely held corporation
Closely held corporation is a corporation in which the voting stock is held by a small ...