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Basic Financial Statements

 Self-Paced Overview

The Balance Sheet

The Balance Sheet – Order of Listing

Items on a balance sheet are listed in order of liquidityLiquidity:For assets, liquidity is nearest to cash. For liabilities, liquidity refers to how quickly the claim will mature.. Liquidity takes on a slightly different meaning for assets and for claims on assets. For assets, liquidity means nearness to cash. For this reason cash is the first item on the balance sheet.

After cash, the other current assets are listed in order of liquidity. Marketable securities (which can be converted to cash by selling them), accounts receivable (which may be factored), and finally inventories make up the rest of the current assets. Inventories, which are considered current assets, are listed last because it is generally harder to convert to cash a half-finished item in production than it would a U.S. Treasury bond, for example.

Following current assets come those assets that would take more time to convert to cash. Buildings, land, and equipment would all be considered long-term or fixed assetsFixed Assets:Long-term assets..

When ranking claims on assets, liquidity refers to how quickly the claim against the company matures. Short-term or current liabilities mature quickly. Intermediate, and then long-term liabilities would be listed next. Sometimes as longer-term liabilities move toward maturity, the portion that matures is moved into current liabilities.

Last on the claims portion of the balance sheet would be the equity accounts. For a corporation, the preferred stock accounts would be listed before common equity accounts. The last claimants on a company's assets are the common stockholders.

Balance Sheet
Products, Inc.

 
January 1, 2017

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

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