A company's financial statements consist of its balance sheet, a snap shot of its financial condition at a given point in time; and its income statement, a view of its financial activity over a specific time period. A company's balance sheet is prepared in accordance with the basic principals of double-entry bookkeeping.

This means that any changes on the asset side of the balance sheet need to have an offsetting change on the liability side in order for the balance sheet to balance.

The basic balance sheet formula reads as follows:

Formula
Assets = Liabilities + Equity or Assets - Liability = Equity.

A basic exhibit of the balance sheet follows:

Corporation Balance Sheet as of 31 December, XXXX
Assets Liabilities
Current Assets Current Liabilities
Cash and Equivalents - cash and money market instruments. Accounts Payable - sums owed to suppliers and other costs of doing business.
Accounts Receivable - amounts due from customers for the sale of goods and services adjusted for a bad debt allowance. Accrued Wages Payable - all manner of compensation owed (wages, salaries and commissions).
Inventory - cost of raw materials, work in progress and finished goods. Current Portion of Long Term Debt - that due within twelve months.
Prepaid Expenses - as yet not benefited from. These include rent, taxes, advertising, etc. Notes Payable - balance remaining on any borrowings
Fixed Assets-property, plant and equipment. Long Term Liabilities
Other Assets - intangibles such as formulas, goodwill (the company\'s value above its book value), contract rights. Funded debt - that due in five or more years. Mortgages, long term promissory notes, outstanding corporate bonds.




Ratio analysis: Liquidity Ratios

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. Managing Wealth

    Breaking Down The Balance Sheet

    Knowing what the company's financial statements mean will help you to analyze your investments.
  3. 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.
  4. 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.
  5. Investing

    Value Investing: Finding Value In Financial Reports And Balance Sheets

    There is plenty of information about a company that you'll want to know as a value investor, but that you can't get from a casual glance at a stock quote or from reading most stock market commentary. ...
  6. Entrepreneurship & Small Business

    Understanding Total Liabilities

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

    Accounting Basics: Financial Statements

    By Bob Schneider Financial statements present the results of operations and the financial position of the company. Four statements are commonly prepared by publicly-traded companies: balance ...
  8. Markets

    Understanding The Federal Reserve Balance Sheet

    We are all connected to the Fed's balance sheet, and the currency notes that we hold are its liabilities.
  9. Investing

    Current Liabilities

    Current Liabilities are company debts due within one year or one operating cycle, whichever is greater. An operating cycle is the time it takes a company to purchase inventory and convert it ...
  10. Investing

    What's a Liability?

    A liability is a debt. It is an obligation that arises during the course of business and represents a third-party claim on the company's assets. A liability can arise in a number of different ...
Trading Center