GossipSloth

Balance Sheets

1

In financial accounting, a balance sheet or statement of financial position is a summary of the financial balances of an individual or organisation, whether it be a sole proprietorship, a business partnership, a corporation, private limited company or other organization such as Government or not-for-profit entity.

A sole proprietorship, also known as the sole trader or simply a proprietorship, is a type of enterprise that is owned and run by one natural person and in which there is no legal distinction between the owner and the business entity.

Accounting or accountancy is the measurement, processing and communication of financial information about economic entities such as businesses and corporations.

Financial accounting is the field of accounting concerned with the summary, analysis and reporting of financial transactions pertaining to a business.

What is a balance sheet? - MoneyWeek Investment Tutorials by MoneyWeek

2

Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year.

A fiscal year is the period used by governments for accounting and budget purposes, which vary between countries.

What is a Balance Sheet? by cliqvid

3

A balance sheet is often described as a "snapshot of a company's financial condition".

4

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.

Financial statements is a formal record of the financial activities and position of a business, person, or other entity.

5

A standard company balance sheet has two sides: assets, on the left and financing, which itself has two parts, liabilities and ownership equity, on the right.

6

The main categories of assets are usually listed first, and typically in order of liquidity.

In business, economics or investment, market liquidity is a market's ability to purchase or sell an asset without causing drastic change in the asset's price.

7

Assets are followed by the liabilities.

8

The difference between the assets and the liabilities is known as equity or the net assets or the net worth or capital of the company and according to the accounting equation, net worth must equal assets minus liabilities.

Net worth is the value of all the non-financial and financial assets owned by an institutional unit or sector minus the value of all its outstanding liabilities.

9

Another way to look at the balance sheet equation is that total assets equals liabilities plus owner's equity.

10

Looking at the equation in this way shows how assets were financed: either by borrowing money or by using the owner's money.

11

Balance sheets are usually presented with assets in one section and liabilities and net worth in the other section with the two sections "balancing".

12

A business operating entirely in cash can measure its profits by withdrawing the entire bank balance at the end of the period, plus any cash in hand.

13

However, many businesses are not paid immediately; they build up inventories of goods and they acquire buildings and equipment.

14

In other words: businesses have assets and so they cannot, even if they want to, immediately turn these into cash at the end of each period.

15

Often, these businesses owe money to suppliers and to tax authorities, and the proprietors do not withdraw all their original capital and profits at the end of each period.

A tax is a financial charge or other levy imposed upon a taxpayer by a state or the functional equivalent of a state to fund various public expenditures.

16

In other words, businesses also have liabilities.

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