In accounting, balance sheets are a type of financial statement that reports the assets, liabilities, and shareholders’ equity at a specific point in time.
Essentially reports what you own and what you owe.
Elements
The balance sheet has the following elements:
- Assets — resources owned/controlled by a business which are expected to provide a future economic benefit. For example: cash, accounts receivable, supplies, and equipment.
- Current assets — assets expected to be converted to cash or used in the business within one year of the balance sheet date. Listed in order of liquidity.
- Fixed assets — tangible assets with relatively long useful lives, used in operating the business and not ordinarily sold.
- Intangible assets — non-current assets that do not have physical substance and represent a privilege or right. Examples include goodwill, intellectual property, and licenses.
- Liabilities — future obligations (i.e., they must be paid off in the future) of the business resulting from past transactions. For example, accounts payable, notes payable.
- Current liabilities — obligations expected to be discharged within the coming year.
- Long-term liabilities — debts expected to be discharged after one year.
- Shareholders’ equity — consists of share capital, representing the primary ownership interest in a corporation. Also the retained earnings, which are the accumulated earnings of the corporation that have not been distributed to shareholders.
The fundamental accounting equation tells us that:
Construction
The title must have these three elements:
- Company name
- Balance sheet
- Date
The left side has all the assets.
- Current assets — cash, accounts receivable
- Fixed assets — land, franchise, building, equipment
The right side has the liabilities and owners’ equity.
- Current liabilities — accounts payable, taxes payable
- Long-term liabilities — loans, bond issues (minus what was paid in the current liabilities)
- Owners’ equity — common stock, retained earnings, any upfront investments into the company.
We need totals for each sub-field. We also need total assets, total liabilities, total equity, and total liabilities + OE.
The cash is computed last. Since it has to balance the equation.