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What is a balance sheet?

Vladimir Kulinich
Vladimir Kulinich
March 26, 2013
What is a balance sheet?

Every company or firm has a balance sheet. That is the balance sheet, tell our article. A balance sheet is a report on liabilities (the sources of their financing) and assets (funds of an enterprise) of an enterprise, the value of which is expressed in money. This is what is included in the balance sheet:

  • Assets show how the firm used the money received;
  • Obligations show how much money the company received and from where.

The total amount of liabilities to shareholders and creditors should be equal to the total amount of assets. In any such balance sheet, you must specify the name of the company and the date when these indicators were removed. Also, the balance sheet is one of the many financial statements of the company, to which must be attached:

  • report on the use and sources of funds (cash flow statement);
  • loss and profit statement;
  • external audit report;
  • notes to the financial report.

Balance sheet structure

Asset Balance sheet consists of two sections:

  • current assets - assets used less than 1 year, for example: materials, raw materials, cash, receivables and others;
  • non-current assets - assets used for more than 1 year, for example: equipment, intangible assets, buildings, long-term investments and others.

Non-current assets are considered to be less liquid than current assets, that is, their conversion into money is longer. When the Asset shows what property the company has, then Liabilities are the sources from which this property is formed. Liability balance has 3 sections:

  • reserves and capital (these are own funds of the owners of the company);
  • short-term liabilities (for example, debt to suppliers or employees);
  • long-term liabilities (for example, loans, loans and other debt).

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