Balance Sheet

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A balance sheet is a snapshot or a quantitative summary of a business' financial condition at a specific moment in time, usually at the close of an accounting period. Also known as statement of financial position or financial condition, it comprises of assets, liabilities, and owners' or stockholders' equity.

Balance sheet, along with income statements, is the most basic element in providing financial reporting to potential lenders such as banks, investors, and vendors who are considering how much credit to grant the firm. Of the four basic financial statements, the balance sheet is the only statement which applies to a single point in time. It tells you the general financial condition of the company and where it is headed to, either to expanding more branches or trimming various expenses to sustain the business operation.

The first part of a balance sheet shows all the productive assets a company owns, and the second part shows all the financing methods such as liabilities and equity. Company's assets are listed in order of liquidity, from most liquid to least liquid starting with current assets and moving on to fixed Assets. After listing the assets, you then have to account for the liabilities of your business. Like assets, liabilities are classified as current or long term and listed in order of liquidity. Once the liabilities have been listed, the owner's equity can then be calculated. The amount attributed to owner's equity is the difference between total assets and total liabilities. A basic tenet of double-entry book-keeping is that total assets (what a business owns) must equal liabilities plus equity (how the assets are financed). In other words, at any given time, the balance sheet must always balance.

An audited balance sheet is often demanded by investors, lenders, suppliers, and taxation authorities; and is required by law under the corporate legislation (such as the Companies Act). To be considered valid, a balance sheet must give a 'true and fair view' of the entity's state of affairs, and must follow the provisions of GAAP in its preparation. The balance sheet tells investors how much money the company has, how much it owes, and what is left for the stockholders. There are many techniques used in analyzing the balance sheet however the most noted method is known as Financial Ratios analysis. This method is an excellent choice because it gives an in-depth understanding of the company's condition, not only the financial aspect but also the operations side of it.

A balance sheet does not necessarily "value" a company, since assets and liabilities are shown at "historical cost" and may greatly overstate or understate the real value of certain corporate assets and liabilities. At the same time some intangible assets such as brands, quality of management, market etc are also not included.

Balance Sheet may be prepared in any of the following two formats.

XYZ Company
Balance Sheet
December 31, 20XX

ASSETS			LIABILITIES

Current Assets			Current Liabilities
	Cash	$ 2,000		Notes Payable	$ 5,000
	Accounts Receivable	40,000		Accounts Payable	35,000
	Inventory	30,000		Wages Payable	8,000
	Supplies	3,000		Interest Payable	2,000
	Prepaid Insurance	1,500		Taxes Payable	6,000
				Unearned Revenues	1,000
Total Current Assets		76500	Total Current Liabilities		57,000
Investments			Long-term Liabilities
	Land	6,000		Notes Payable	20,000
Property, Plant & Equipment				Bonds Payable	100,000
	Buildings	180,000	Total Long-term Liabilities		120,000
	Equipment	201,000
	Less: Accum Depreciation	(51,000)	Total Liabilities		197,000
		330,000
Intangible Assets			STOCKHOLDERS' EQUITY
	Goodwill	3500		Common Stock	110,000
				Retained Earnings	159,000
		339,500		Less: Treasury Stock	(50,000)
			Total Stockholders' Equity		219,000
Total Assets		$416,000	Total Liabilities & Stockholders' Equity		$416,000

(OR)

Balance Sheet of XYZ, Ltd. as of 31 December 20XX

ASSETS

Current Assets
Cash	$2,000
Accounts Receivable	$40,000
Inventory	$30,000
Supplies	$3,000
Prepaid Insurance	$1,500
	---------------
Total Current Assets	$76,500

Investments
Land	$6,000
Property, Plant & Equipment
Buildings	$180,000
Equipment	$201,000
Less Accu Depreciation	$51,000
	---------------
	$330,000
Intangible Assets
Goodwill	$3,500
	----------------
Total Assets	$416,000


LIABILITIES

Notes payable	$5,000
Accounts payable	$35,000
Wages payable	$8,000
Interest payable	$2,000
Taxes payable	$6,000
Unearned Revenue	$1,000
	-----------------
Total Current Liabilities	$57,000

Long Term Liabilities
Notes payable	$20,000
Bonds payable	$100,000
	-----------------
Total Liabilities	$197,000

STOCKHOLDERS' EQUITY
Common Stock	$110,000
Retained Earnings	$159,000
Less Treasury Stock	$50,000
	-----------------
Total Stockholders’ Equity	$219,000

Total Liabilities and Stockholder’s Equity	$416,000