Accounting



What does a balance sheet tell us?

A balance sheet reports the dollar amounts of a company’s assets, liabilities, and  owner’s equity (or stockholders’ equity) as of a previous date.

Assets include cash, accounts receivable, inventory, investments, land, buildings, equipment, some intangible assets, and others. Generally assets are reported at their cost or a lower amount due to depreciation, the cost principle, and conservatism. The cost principle also means that some very valuable aspects of the company are not listed as assets. For example, a company’s outstanding reputation, its effective management team, and its amazing brand recognition are not reported as assets if they were not acquired in a transaction involving another party or entity.

Liabilities are obligations of a company as of the balance sheet date. These include loans payable, accounts payable, warranty obligations, taxes payable, and more.

The stockholders’ equity or owner’s equity report the amount of  the assets that came from the owners and not from its creditors.

The balance sheet allows you to easily determine the amount of a company’s working capital and whether the company is highly leveraged.

With every balance sheet distributed by a company there should be notes or footnotes. These notes provide important additional information about the company’s financial position including potential liabilities not yet appearing as amounts on the balance sheet.

Learn more about the Balance Sheet.

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About the Author: Harold Averkamp (CPA) has worked as an accountant, consultant, and university accounting instructor for more than 25 years.

He is the author of the 2010 Master Accounting Download Package which has been praised for it's ability to simplify accounting in a way that anybody can understand.




Comments

12 Responses to “What does a balance sheet tell us?”

  1. Anita on January 21st, 2010 1:31 pm

    I am thinking of studying accounting. This website will be helpful in determining if making the expense will be worthwhile

  2. isuto on January 23rd, 2010 8:57 am

    the balance sheet show us the amounts of total assets and liabilities of the business firm.assets includs land,buldings,motor vehiclesand others,liabilities includs account payables,outstandings and other s

  3. umar zada on January 24th, 2010 1:24 am

    plase send me all the information about the accounting.
    Thanks.

  4. Nick[ 'SOORAJ' ] on January 24th, 2010 1:40 pm

    A statement containing balances of assets liabilities and capital of a business usually prepared at the end of the financial year ‘accounting equation’ assets=liabilities+owner’s equity.

  5. tadessse on January 28th, 2010 2:16 pm

    give me some e.g of illestration problem

  6. p.venkataswamy on January 29th, 2010 3:25 am

    this very good mater i like this mate
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  7. Betty on February 2nd, 2010 6:49 pm

    Can you reccomend me a good text book on Cost Allocation for goverment grants or non-profits agencies?

    Thanks!

  8. Wajahat Khan on February 4th, 2010 1:31 pm

    Hi Sir,

    I am already a member, and need Accounting Cheat sheet.

    Please forward me accounting cheat sheet.

    Regards,

    Wajahat Khan

  9. Timmy on February 5th, 2010 5:32 am

    Eh!!! good job, pls could u send more info. on Aditing.

  10. Esteban R on February 5th, 2010 2:31 pm

    Please send the Cheat sheet
    Thank you
    Do you have any info on how to merge
    accounts from different companies owned
    by the same person Consolidating the
    resuts.

  11. lubna kousar on February 8th, 2010 6:01 am

    where exactly the cost sheet is required?

  12. srkhanzada on February 17th, 2010 11:07 am

    salam,plz give me informatinon about accounting elements.

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