The Balance Sheet is an accounting statement, which is a formal financial report of an entity. The Balance Sheet is also known as a statement of financial position. It includes assets, liabilities (debts), and owner’s equity. It is prepared after the income statement and statement of retained earnings. The Balance Sheet shows the financial position of an entity at a particular moment in time.
The Balance Sheet has three sections: assets, liabilities, and owner’s equity. Assets = Liabilities + Owner’s Equity. Both assets and liabilities are further divided based on time. Current assets are the assets that are expected to exist for less than one year while long-term assets are expected to live for over one year. The one-year rule also applies to current liabilities and long-term liabilities.
Current Assets
|
Cash |
| + |
Accounts Receivable |
| – |
Allowance for doubtful accounts |
| + |
Notes receivable |
| + |
Merchandise inventory |
| + |
Prepaid insurance |
| = |
Total Current Asserts |
Long-Term Assets
|
Land |
| + |
Building |
| – |
Accumulated Depreciation on Building |
| + |
Delivery Truck |
| – |
Accum Depr’n on Truck |
| = |
Total long-term assets |
|
Total Assets |
Current Liabilities
|
Accounts Payable |
| + |
Notes Payable |
| + |
Salaries Payable |
| + |
Unearned Rent |
| = |
Total Current Liabilities |
Long-Term Liabilities Liabilities
|
Notes Payable |
| = |
Total Liabilities |
Owner’s Equity
|
Common Stock ($2 par 10,000 issued) |
| + |
Paid in in excess of par |
| = |
Total paid in capital |
| + |
Retained Earnings |
| = |
Total Owner’s Equity |
|
Total Liabilities and Owner’s Equity |