Balance Sheet Training
The balance sheet reflects the assets, liabilities, and owners’ equity at a point in time. In other words, it shows, on a specific day, what the company owned, what it owed, and how much it was worth. The balance sheet is called such because it balances – assets must always equal liabilities plus owners’ equity. All the financial statements ultimately flow to the balance sheet.
The equation for the balance sheet is:
Assets = Liabilities + Owners’ Equity
Our sample balance sheet below lists many of the common categories on a balance sheet, but just as each business is unique so are their financial statements. Each company may have more or less items depending on their needs.
- Assets are what the company owns, like cash and securities, machinery and equipment, buildings and land. Assets are divided into two categories, current assets which include anything that can be turned into cash in less than a year, and long-term assets which include physical assets that have a useful life of more than a year.
- Liabilities are the financial obligations a company owes to other entities. Liabilities are divided into two categories just like the assets. Current liabilities are those that have to be paid off in less than a year. Long-term liabilities are those that come due over a longer time frame.
- Owners’ Equity, shareholders’ equity, or stockholders’ equity is what is left over after we subtract our liabilities from our assets. Equity includes the capital provided by investors and the profits retained by the company over time, called retained earnings.
Our financial statements training classes go through the key terms on the balance sheet where you will get a clearer picture of how your company is doing and whether you’ll be around for a while. You’ll also go through some key ratios and learn the story the financials tell about your company.