Definition
Also known as a statement of financial position, the balance sheet is used to show the financial health of a company at a particular point in time. The balance sheet consists of assets, liabilities, and owner's equity in the company. It is one of the four key financial statements issued by public companies.
Calculation
Assets = Liabilities + Owner's Equity
Explanation
As the name implies, accountants maintain ledger information so the two sides of the above equation always remain "in balance." When constructing this statement, the order of items listed is assets, liabilities, and then owner's equity. Subsections include additional detail, and are typically listed in order of decreasing liquidity. For example, current assets are the first subsection appearing in this statement.
Larger corporations may prepare this document at the end of each month; enabling management to have an understanding of the corporation's financial position. Quarterly and annual reports are commonplace
Related Terms
The income statement is a financial accounting report that demonstrates how net income, or profit, is derived from revenues. The main categories appearing on an income statement include revenues, cost of goods sold, operating expenses, non-recurring items and net income.
Moneyzine EditorNovember 6th, 2024
The accounting term used to describe an economic resource, which is owned by the corporation and expected to provide future benefits to its operation, is asset. Appearing on the balance sheet, assets are typically broken down into two categories:Moneyzine EditorNovember 6th, 2024.png)
The financial accounting term liability is used to describe the debt of a corporation that results from a transaction involving the transfer of an asset or the provision of a service. Liabilities are reported on a company's balance sheet.Moneyzine EditorNovember 6th, 2024- The financial accounting term owner's equity is used to describe the resources that are owned by the common and preferred stock shareholders of a company. Owner's equity is reported on a company's balance sheet.Moneyzine EditorNovember 6th, 2024
The accounting term financial statement refers to a series of documents that reflect the collection and summary of accounting data. Financial statements include the balance sheet, income statement, cash flow statement, and the statement of retained earnings.Moneyzine EditorNovember 6th, 2024
The cash flow statement is a financial accounting report that demonstrates how cash flows both into and out of a company. Cash flow statements provide investors and analysts with insights into the change in cash and cash equivalents in a given accounting period.Moneyzine EditorNovember 6th, 2024- The term off-balance-sheet financing refers to arrangements that do not appear as a liability on the balance sheet of a company. Examples of off-balance-sheet financing include research and development arrangements, operating leases, and project financing.Moneyzine EditorSeptember 20th, 2023
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