Balance Sheet

The Balance Sheet

Of the two traditional types of financial statements, the balance sheet relates to an entity’s position, and the income statement relates to its activity. The balance sheet provides information about an organization’s assets, liabilities, and owners’ equity as of a particular date (such as the last day of the accounting or fiscal period).

The format of the balance sheet reflects the basic accounting equation: Assets equal equities. Assets are economic resources that provide potential future service to the organization. Equities consist of the organization’s liabilities together with the equity interest of its owners. (For example, a certain house is an asset worth $70,000; its unpaid mortgage is a liability of $45,000, and the equity of its owners is $25,000.)

Assets are categorized as current or long-lived. Current assets are usually those that management could reasonably be expected to convert into cash within one year; they include cash, receivables, merchandise inventory, and short-term investments in stocks and bonds. Long-lived assets encompass the physical plant—notably land, buildings, machinery, motor vehicles, computers, furniture, and fixtures. Long-lived assets also include real estate being held for speculation and intangibles such as patents and trademarks.

Liabilities are obligations that the organization must remit to other parties, such as creditors and employees. Current liabilities usually are amounts that are expected to be paid within one year, including salaries and wages, taxes, short-term loans, and money owed to suppliers of goods and services. Noncurrent liabilities are usually debts that will come due beyond one year—such as bonds, mortgages, and long-term loans. Whereas liabilities are the claims of outside parties on the assets of the organization, the owners’ equity is the investment interest of the owners in the organization’s assets.

When an enterprise is operated as a sole proprietorship or as a partnership, the balance sheet may disclose the amount of each owner’s equity. When the organization is a corporation, the balance sheet shows the equity of the owners—that is, the stockholders—as consisting of two elements:
(1) the amount originally invested by the stockholders; and
(2) the corporation’s cumulative reinvested income, or retained earnings (that is, income not distributed to stockholders as dividends), in which the stockholders have equity.

More Accounting Entries

Accounting information can be classified into two categories: financial accounting or public information and managerial accounting or private information.
Read about Financial Accouting here
Read about Managerial Accouting here

Specialized Accounting

Of the various specialized areas of accounting that exist, the three most important are auditing, income taxation, and nonbusiness organizations. Auditing is the examination, by an independent accountant, of the financial data, accounting records, business documents, and other pertinent documents of an organization in order to attest to the accuracy of its financial statements. Read about Auditing here

The second specialized area of accounting is income taxation. Read about income taxation here

A third area of specialization is accounting for nonbusiness organizations, such as universities, hospitals, churches, trade and professional associations, and government agencies. Read about accounting for nonbusiness organizations here

Financial Reporting

Traditionally, the function of financial reporting was to provide proprietors with information about the companies that they owned and operated. Read about financial reporting here

Accounting Principles

Accounting as it exists today may be viewed as a system of assumptions, doctrines, tenets, and conventions, all encompassed by the phrase “generally accepted accounting principles.”Read about accounting principles here

The Income Statement

The traditional activity-oriented financial statement issued by business enterprises is the income statement. Read about Income Statements here

Regulations and Standards in the United States

Until 1973, accounting principles in the United States had traditionally been established by certified public accountants. Read about Accounting Regulations and Standards in the United States

Source: “Accounting and Bookkeeping”Microsoft® Encarta® Online Encyclopedia

Hierarchical Display of Balance sheet

Business And Competition > Accounting > Accounting > Financial accounting
Business And Competition > Management > Financial management > Balance-sheet analysis

Balance sheet

Concept of Balance sheet

See the dictionary definition of Balance sheet.

Characteristics of Balance sheet

[rtbs name=”xxx-xxx”]

Resources

Translation of Balance sheet

Spanish: Balance
French: Bilan
German: Bilanz
Italian: Bilancio di società
Portuguese: Balanço
Polish: Bilans

Thesaurus of Balance sheet

Business And Competition > Accounting > Accounting > Financial accounting > Balance sheet
Business And Competition > Management > Financial management > Balance-sheet analysis > Balance sheet