Wednesday, June 18, 2008

What is a Balance Sheet?

The Balance Sheet is also known as statement of financial position. The balance sheet is a picture of a company's financial condition.

The Balance sheet is divided in three parts: Assets are listed first, follow by Liabilities, and the last part is the Shareholder's equity. The difference between the assets and the liabilities is known as equity or the net assets or the net worth of the company.

In financial accounting the balance sheet is the only statement which applies to a single point in time.

Here is an example of a Balance Sheet:

BALANCE SHEET of ABC Inc. as of Dec 31 200x


Current Assets
Cash and cash equivalents
Accounts receivable (debtors)
Prepaid Expenses
Investments held for trading
Other current assets

Fixed Assets (Non-current Assets)
Property, plant and equipment
Less: Accumulated Depreciation
Other intangible fixed assets
Investments in associates
Deferred tax assets

Liabilities and Equity

Current Liabilities: amounts due within one year
Accounts payable
Current income tax liabilities
Current portion of bank loans payable
Short-term liabilities
Other current liabilities

Long Term Liabilities: amounts due more than one year
Bank Loans
Issue debt securities
Deferred tax liability
Minority interest

Retained Earnings