The balance sheet, which is also known as the statement of financial position, reports a corporation's assets, liabilities, and stockholders' equity account balances as of a point in time. The point in time is often the final instant or moment of the accounting period. Hence it is common for a balance sheet to report a corporation's amounts as of the final instant of December 31. Show An interesting point concerning the balance sheet accounts is that the account balances at the final instant of an accounting year will carry forward to become the beginning balances of the subsequent year. (The other four financial statements report amounts for a period of time.) The format of the balance sheet is similar to the accounting equation: Assets = Liabilities + Stockholders' Equity As result of the double-entry system of accounting, the balance sheet and the accounting equation should always be in balance. Here are a few examples:
You can gain additional insights by studying our free Explanation of the Accounting Equation. Assets Assets are often described as:
Some of the accounts used to record a corporation's assets include:
Normally, the balance sheet will present the asset accounts under one of the following headings:
Liabilities Liabilities are often described as:
Some of the accounts used to record liabilities include:
Liability accounts are usually presented on the balance sheet under one of the following headings:
Stockholders' Equity Stockholders' equity (which is also known as shareholders' equity) is defined as a corporation's assets minus its liabilities. Stockholders' equity can be viewed as:
The major components of stockholders' equity include:
Since the reported amounts for a corporation's assets and liabilities reflect US GAAP (including the historical cost principle), the amount of stockholders' equity does not indicate a corporation's current market value. For example, valuable trademarks and brand names that a corporation developed internally are not reported as assets and therefore are not included in the amount of stockholders' equity. Stockholders' equity will be discussed further under the Statement of Stockholders' Equity. Format of the Balance Sheet The following shows the headings and classifications found in a classified balance sheet:
Working Capital and Current Ratio I believe that bankers will immediately calculate a corporation's working capital when meeting with a loan applicant. Working capital is calculated as follows: Working capital = current assets minus current liabilities This means that a corporation with $100,000 of current assets and $100,000 of current liabilities has no working capital. If it has $150,000 of current assets and $100,000 of current liabilities, it has $50,000 of working capital. Related to working capital, is the current ratio, which is calculated as follows: Current ratio = current assets divided by current liabilities Hence a corporation with $100,000 of current assets and $100,000 of current liabilities will have a current ratio of 1:1. If the corporation has $150,000 of current assets and $100,000 of current liabilities, its current ratio is 1.5:1. The amount of working capital and the current ratio are indicators of a corporation's ability to pay its obligations when they come due. These and other financial ratios can be found in our Explanation of Financial Ratios. Current assets include cash and the assets that will turn to cash within one year of the balance sheet date (or within the operating cycle, if it is longer than one year). In other words, current assets include:
Current liabilities are a corporation's obligations that are due within one year of the balance sheet date (or within the operating cycle, if it is longer than one year) and will require the use of a current asset or will create another current liability. The following are examples of current liabilities: Which financial statement reports assets liabilities and stockholders equity quizlet?Terms in this set (13) What does the balance sheet report? It shows the financial position of a company on a particular date. It reports assets, liabilities, and stockholders' equity of a company.
Which financial report lists assets liabilities and shareholder equity at a specific point in time?Balance Sheet: A balance sheet lists a company's assets, liabilities, and owner's equity at a specific point in time. It's usually thought of as the second most important financial statement. A balance sheet, at its core, shows the liquidity and the theoretical value of the business.
What financial statement has assets and liabilities?Balance Sheet Basics
This financial statement details your assets, liabilities and equity, as of a particular date.
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