Accounting Financial Statements - The Balance Sheet

The balance sheet, also called the statement of financial position, contains three items: assets, liabilities, and stockholders' value. It is old at the instant when the accounting period ends. The accounting formula that is a big aspect of the financial statements is: assets equal liabilities plus stockholders' value. When working with a balance sheet: the total assets must equal the total liabilities and value.

The first aspect of the balance sheet is assets. There are two main groups of assets: current and long-term assets. Current assets are required to be transformed to cash in the next a year or one business managing pattern (if longer than a year). Cash is the most liquidated asset. Short-term investment stocks are bond and shares that an organization plans to offer within the next season. Account receivable is the amount the organization desires to gather from customers. Notes receivable are amount that the organization desires to gather from a customer who finalized a promissory note. An organization also contains stock, which is current assets, into the balance sheet. Prepaid expenses are also an aspect of the assets side of the balance sheet because the organization will benefit from them in the future.

Long-term assets consist of plant, property, and equipment, intangibles, and investment strategies. Plant, property, and equipment (PPE) consist of land, building, computer systems, store furnishings, etc. Accumulated depreciation is also included on the balance in the long-term assets area. It is the amount of depreciation from PPE at the end of the year. It is taken from the cost of PPE to determine its book value. Intangibles are assets with no physical form such as patents. Investments are long-term assets because the organization does not expect to offer them within the next year.

The second aspect of the balance sheet is liabilities. Liabilities are also divided into two categories: current and long-term liabilities. Current liabilities are debt within one year or one operating cycle. Accounts payable is the company promises to pay a debt coming up from a credit purchase. Income taxation payable is tax debt obligations due to the government. Short-term borrowings are notes payable that the organization has guaranteed to pay back within one year. Salaries and wages payable are amount owed payable to employees. Long-Term liabilities are payable after one year.

The last part of the balance sheet is stockholders' value. The Stockholders' value is assets less liabilities. There are two parts to stockholders' equity: paid-in investment and retained earnings. Paid-in investment is the quantity the stockholders have spent in that organization. The basic aspect of paid-in investment is common stock where an organization issues stock to the stockholders as proof of their possession. Retained earnings are the quantity gained by income-producing activities.

I hope this assisted describe the areas of the balance sheet.