balance sheet

Examples of balance sheet in the following topics:

• Defining the Balance Sheet

  • The balance sheet is a summary of the financial balances of a company.
  • Of the four basic financial statements, the balance sheet is the only statement which applies to a single point in time of a business' calendar year.
  • A standard company balance sheet has three parts: assets, liabilities, and ownership equity.
  • Balance sheets are usually presented with assets in one section and liabilities and net worth in the other section with the two sections "balancing. "
  • This balance sheet shows the company's assets, liabilities, and shareholder equity.

• Basic financial statements

  • Later in this chapter we will discuss some of the other types of reports you will want to be able to produce in order to plan and control your business finances, but for now, let us concentrate on the two most fundamental statements of all: The Income Statement and the Balance Sheet.
  • The Balance Sheet will show you the financial condition of your business, what you own, what you owe, and the owners' financial interest.
  • You will sometimes hear the Income Statement referred to as the Profit and Loss Statement and the Balance Sheet called the Statement of Financial Condition.
  • You can see why it is called a Balance Sheet.
  • In other words, they must be in balance.

• Financial Accounting

  • These three statements are the balance sheet, the income statement, and the statement of cash flows.
  • A balance sheet demonstrates the overall value of organizational assets by listing current and long-term assets (fixed or otherwise) alongside short term and long term liabilities and stakeholder equity.
  • This is the golden rule of balance sheets (hence the name: balance).
  • The items on a balance sheet can range from long term debt to current inventory to dividends to accounts receivable to cash on hand.
  • This balance sheet demonstrates such common line items an account will be populated and measuring when creating and releasing this financial statement.

• The Accounting Equation

  • The fundamental accounting equation, which is also known as the balance sheet equation, looks like this: $\text{assets} = \text{liabilities} + \text{owner's equity}$.
  • The fundamental accounting equation is kept in balance after every business transaction because everything falls under these three elements in a business transaction.
  • Looking at the fundamental accounting equation, one can see how the equation stays is balance.
  • For example, if the company uses cash to purchase inventory, cash is decreased (credited) and inventory is increased (debited); thus, assets as a whole remain unchanged and the equation remains in balance.

• Owners' Equity

  • It appears on the balance sheet/statement of financial position, one of the four primary financial statements.

• Financial Statements Across Periods

  • Companies prepare three financial statements according to GAAP rules: the income statement, the balance sheet, and the cash flow statement.
  • The balance sheet: This is a financial snapshot of what the company owns (assets), what it owes (liabilities), and its worth free and clear of debt (or the value of its equity).
  • Analyzing a balance sheet informs shareholders about the company's financial health.

• Assets

  • The balance sheet of a firm records the monetary value of the assets owned by the firm .
  • That is, the total value of a firm's assets are always equal to the combined value of its "equity" and "liabilities. " In other words, the accounting equation is the mathematical structure of the balance sheet.

• The Accounting Cycle

  • A particular working document called an unadjusted Trial balance is created.
  • This lists all the balances from all the accounts in the Ledger.
  • Notice that the values are not posted to the trial balance, they are merely copied.
  • These values are then passed through the accounting system resulting in an adjusted Trial balance.
  • Financial statements are drawn from the trial balance which may include: the Income statement, the Balance sheet, and the Cash flow statement.

• Commercial Banks

  • Commercial banks engage in the following activities: the processing of payments; accepting money on term deposit; lending money by overdraft, installment loan, or other means; providing documentary and standby letters of credit guarantees, performance bonds, securities underwriting commitments and other forms of off- balance sheet exposures; and the safekeeping of documents and other items in safe deposit boxes.
  • An overdraft occurs when money is withdrawn from a bank account and the available balance goes below zero.
  • If the positive balance exceeds the agreed terms, then additional fees may be charged and higher interest rates may apply.

• The Business Plan

  • Elements of a Business Plan: Cover sheet, Executive summary (statement of the business purpose), Table of contents, Body of the document, Business Description of business, Marketing Competition, Operating procedures, Personnel Business insurance, Financial data, Loan applications, Capital equipment and supply list, Balance sheet Break-even analysis, Profit and loss statements, Three-year summary, Detail by month -- first year, Detail by quarters -- second and third year, Assumptions upon which projections were based, Pro-forma cash flow, Supporting documents, Tax returns of principals (partners in the business) for last three years, Personal financial statements (all banks have these forms), Copy of franchise contract and all supporting documents provided by the franchisor (for franchise businesses), Copy of proposed lease or purchase agreement for building space, Copy of licenses and other legal documents, Copy of resumes of all principals, Copies of letters of intent from suppliers, etc.