The sections of the Balance Sheet (with examples)

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First…

➡️ What is a Balance Sheet?

The Balance Sheet shows you the net worth of your company

It shows you what the business OWNS (Assets)

And how those assets were funded by amounts from CREDITORS (Liabilities)

and OWNERS (Owners Equity)

➡️ What are the sections of the Balance Sheet?

1️⃣ Assets —> What the company owns (both tangible and intangible)

➡️ Current Assets —> assets that can be converted to cash typically within 1 year

Examples include:

Cash

Accounts Receivable

Inventory

Prepaid Expenses

➡️ Long Term Assets —> assets that the company intends to hold on to typically for longer that a year

Examples include:

Stocks

Bonds

Real Estate

➡️ Property Plant and Equipment —> assets used in operations that have a useful life of more than 1 year

Examples include:

Machinery

Vehicles

Laptops

Buildings

➡️ Intangible Assets —> Asses that have no physical form, but have value

Examples include:

Patents

Goodwill

Trademarks

Copyrights

2️⃣ Liabilities —> What the company owes to creditors, customers, or suppliers

These amounts owed are CAPPED, and have a fixed amount owed

➡️ Current Liabilities —> Liabilities that are due to be repaid typically within 1 year

Examples includes:

Accounts Payable

Credit Cards

Deferred Revenue

Accrued Expenses

➡️ Long Term Liabilities —> Liabilities that are due to repaid typically after 1 year

Examples include:

Line of Credit

Convertible Notes

Capital Leases

3️⃣ Equity —> What the company owes to the owners, which includes prior earnings that have not been distributed back to owners

These amounts owed are UNCAPPED, and are dependent on the businesses performance

Examples include:

Common Stock

Preferred Stock

Retained Earnings

Treasury Stock

Accumulated Other Comprehensive Income

That’s a summary of the Balance Sheet, and it’s major sections