Financial Reports Balance Sheet

A Balance Sheet is one of a business’s main financial reports.
It shows three areas of a business. What a company owns, Assets. What a company owes, Liabilities. The third thing it shows is the money or capital and capital equivalent that has been invested into a business by the owners, Owners Equity. A Balance sheet is called a
balance sheet because the dollar amount of the assets MUST equal
the liabilities and owners’ equity.

A company’s assets are broken into 2 categories. Current Assets and Fixed Assets. Current assets are things like your bank accounts, Accounts Receivable, inventory, and prepaid expenses. Currents assets dollar value changes often and is expected to be used to fund the daily operations of the business. Or to be used up within a year. Long-Term or Fixed Assets are things that still have a cash value, but it would take longer to realize the cash. So these are things like office equipment, vehicles, buildings, tools and heavy equipment and land that your business owns. Fixed assets generally are held on to, and have depreciation or amortization.

An interesting side note if your company owns stocks and bonds,
stocks are considered current assets, Bonds are considered a long
term investment. The next part of a balance sheet is for Liabilities
or the money the business owes. This is where you have totals for
things like Accounts Payable, notes payable, loans, employee wages
and taxes to be paid. Current Liabilities are things that should be
paid off within a year. For example, accounts payable, notes payable,
employee wages and taxes. Long term liabilities are things like loans, mortgages, and lines of credit, that are being paid on for many years. The last part of a Balance Sheet is the section that show money or its equivalent that is put into the business by the owners. This is also the section that shows any money that the owners have taken out of the business.

This section can be called Owners Equity, capital investment, or some similar name to show that the money is coming from the owners. A Balance sheet shows the totals for Assets, Liabilities, And Owners Equity. Balance sheets are a static report of the financial health of your company. As of a particular date. The balance sheet and the income statement or profit and loss statement are two of the reports that can be used by banks and other financial institutions to determine the financial health of your company.