What is a balance sheet

Question

what is the balance sheet and what does it tell me

Answer 1

A balance sheet shows Assets, Liabilities and Owner's Equity. It breaks down each of the three categories into different components. The balance sheet is for a given snapshot of time (at a given day). This contrasts to an Income Statement which shows the revenues, expenses and profits over a range of time (usually over a year).

 

The balance sheet follows the equation: Assets = Liabilities + Owner's Equity.

 

Some components of Assets are:

• Cash and receivables
• Capital Equipment
• Inventory
• Trademarks, intellectual property

 

Some components of Liabilities are:

• Long-term Debt
• Accounts Payable
• Short-term Debt

 

Owner's Equity could be broken down into:

• Common stock
• Preferred stock