Basic Financial Statements
Self-Paced Overview
The Balance Sheet
The Balance Sheet is a statement detailing what a company owns (assets) and claims against the company (liabilities and owners' equity) on a particular date. Some analysts liken the balance sheet to a snapshot illustrating a company's financial health.
Keeping in mind the assets and claims, it is helpful to remember the "left–right" accounting equation orientation; assets on the left side, claims on the right. In addition, there are a number of other characteristics of the balance sheet that are noteworthy, such as balancing, order of listing, valuing of items, and definitions of items. These items are discussed with an example balance sheet to illustrate the points.
Balance Sheet
Products, Inc.
January 1, 2012
| Assets | ||
|---|---|---|
| Current Assets | ||
| Cash | $123,000 | |
| Marketable Securities | $200,000 | |
| Accounts Receivable | $345,000 | |
| Inventories | $100,000 | |
| Total Current Assets | $768,000 | |
| Long-Term Assets | ||
| Building (Gross) | $350,000 | |
| −Accumulated Depreciation | $–50,000 | |
| Net Building | $300,000 | |
| Land | $325,000 | |
| Total Long-Term Assets | $625,000 | |
| Total Assets | $1,393,000 | |
| Claims on Assets | ||
|---|---|---|
| Current Liabilities | ||
| Accounts Payable | $100,000 | |
| Notes Payable | $150,000 | |
| Total Current Liabilities | $250,000 | |
| Long-Term Notes | $300,000 | |
| Total Liabilities | $550,000 | |
| Owners' Equity | $843,000 | |
| Total Claims | $1,393,000 | |