I. Basics
Within this section we'll define each asset and liability category on the balance sheet, and prepare a classified balance sheet

Balance Sheet Categories
The balance sheet provides information on what the company owns (its assets), what it owes (its liabilities) and the value of the business to its stockholders (the shareholders' equity) as of a specific date.

Total Assets = Total Liabilities + Shareholders' Equity

  • Assets are economic resources that are expected to produce economic benefits for their owner.
  • Liabilities are obligations the company has to outside parties. Liabilities represent others' rights to the company's money or services. Examples include bank loans, debts to suppliers and debts to employees.
  • Shareholders' equity is the value of a business to its owners after all of its obligations have been met. This net worth belongs to the owners. Shareholders' equity generally reflects the amount of capital the owners have invested, plus any profits generated that were subsequently reinvested in the company.


Look Out!

Components of Total Assets on the balance sheet are listed in order of liquidity and maturity.

Balance Sheet Presentation Formats
Although there are no required reporting balance sheet designs there are two customary formats that are used, the account format and the report format. The two formats follow the accounting equation by subtotaling assets and showing that they equal the combination of liabilities and shareholder's equity. However, the report format presents the categories in one vertical column, while the report format places assets in one column on the left hand side and places liabilities and shareholder's equity on the right. Both formats can be collapsed further into a classified balance sheet that subtotals and shows only similar categories such as current assets, noncurrent assets, current liabilities, noncurrent liabilities, etc.



Balance Sheet Components - Assets

Related Articles
  1. Investing

    Reading the Balance Sheet

    Learn about the components of the statement of financial position and how they relate to each other.
  2. Investing

    5 Tips For Reading A Balance Sheet

    If you know how to read it, the balance sheet provides valuable information on a potential investment.
  3. Investing

    Understanding Total Liabilities

    Total liabilities are the combined debts an individual or company owes.
  4. Investing

    How To Read Apple's Balance Sheet

    We explain how to find, read, and analyze a balance sheet from Apple.
  5. Investing

    What Does Negative Shareholder Equity On A Balance Sheet Mean?

    Negative shareholder equity on a company’s balance sheet is a red flag that should prompt potential investors to take a closer look before committing their money.
  6. Investing

    Comparing the P&L Statement and the Balance Sheet

    Basically, the balance sheet shows how much a company is worth, while the P&L statement reveals if a company is profitable or not.
  7. Investing

    How To Analyze A Company's Financial Position

    Find out how to calculate important ratios and compare them to market value.
  8. Investing

    Explaining Noncurrent Liabilities

    Noncurrent liabilities are financial obligations a company owes a year or more into the future.
  9. Investing

    Outstanding Shares

    Learn more about this important number found on a company's balance sheet.
Frequently Asked Questions
  1. What are the Differences Among a Real Estate Agent, a broker and a Realtor?

    Learn how agents, realtors, and brokers are often considered the same, but in reality, these real estate positions have different ...
  2. What is the difference between amortization and depreciation?

    Because very few assets last forever, one of the main principles of accrual accounting requires that an asset's cost be proportionally ...
  3. Which is better, a fixed or variable rate loan?

    A variable interest rate loan is a loan in which the interest rate charged on the outstanding balance varies as market interest ...
  4. What is the 1003 mortgage application form?

    Learn about the 1003 mortgage application form, what information it requires and why this form is the industry standard for ...
Trading Center