What Is a Balance Sheet?
A balance sheet is one of the fundamental financial statements that shows a company’s assets on one side and its liabilities and shareholders’ equity on the other. Also known as a statement of financial position or a capital account, a balance sheet reports a company’s net worth, calculated by subtracting total liabilities from total assets. The balance sheet is named because it’s always in balance, meaning the sum of a company’s assets should equal its sum of liabilities and shareholders’ equity.
On the left hand of a balance sheet are a firm’s itemized assets, which are separated by long-term and short-term assets. In this section are cash, marketable securities, accounts receivable, inventory and plant assets. Other assets, including the cash surrender value of life insurance policies on officers and property in process of construction, are usually shown as well.
The opposite of the assets section is the liabilities section, which shows the company’s debt and obligations to outside parties. Here are the company’s current liabilities, which include the company’s debts and expenses due within a year (e.g., accounts payable to vendors), as well as its current portion of longer-term debt, such as bank loans or corporate bonds.
The other part of the liabilities section includes noncurrent liabilities, which are debts or expenses that will be paid out over more than a year. Finally, the right hand side of the balance sheet records a company’s shareholders’ equity, which includes the initial investment made into the company by owners and/or shareholders, as well as the company’s accumulated profit. Bilanz Hattingen