What is a Balance Sheet

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Business will always have balance sheet. They can be simple or complex and can be for sectors of their business as well. Balance sheets are used with previous years for comparison.

One can also do a personal balance sheet. A personal balance sheet is a great way to evaluate the current financial status. You can make financial decisions once you know your balance sheet numbers. Hopefully, it’s a good number and it balances. On a personal balance sheet, you will have assets, and liabilities.

What is on the balance sheet for small business? What are considered assets? Assets are cash, accounts receivable, inventory, land, building, patents, tools and equipment. What are liabilities? Liabilities are notes payable, accrued expenses, long term debt, warranties, and account payable. What is owner’s equity? Equity is capital stock, and retained earnings.

Public business entities have a more complex structure and are guided by the international standards committee. Government balance sheets are not the same as businesses. The balance sheet account names and usage is different for every country and the type of organization.

On the balance sheet, you will see current assets and non-current assets. Current assets include cash and cash equivalents, inventories, accounts receivable, and prepaid expenses. The non-current assets are fixed assets like property, plants and equipment, investment property, real estate, intangible assets, financial assets, investments by equity method, biological assets, living plants or animals. What are on their liabilities sides? They will list accounts payable, provisions for warranties or court decisions, financial liabilities, promissory notes and corporate bonds, tax, deferred tax, and unearned revenue.

What is on their equity list? It’s issued capital and reserves, non-controlling interest in equity, and it’s also a part of liabilities since they have to pay shareholders. Stocks are required to be disclosed by number of shares authorized, issued and fully paid, par value of shares, outstanding shares at the beginning and end of period. There needs to be description of rights, preferences, and restrictions of shares, treasury shares, and shares held by subsidiaries and associates, shares reserved for issuance under options and contracts. Description of the nature and purpose of each reserve within owner’s equity.


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