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Financial Balance Sheets

A balance sheet is a snapshot of a business’ financial condition (the book value of a business) at a specific moment in time. Balance sheets are often generated at the close of an accounting period for example the end of a fiscal year.

Generally Balance sheets have 3 parts. Assets, Liabilities and Shareholders equity. At any given time, assets must equal liabilities plus owners’ equity. An asset is anything the business owns that has monetary value. Liabilities are the claims of creditors against the assets of the business.

Assets

Assets can be either current or long-term. An example of current asset is Cash which is considered a liquid asset i.e. immediately obtainable. Long term assets can take the form of business premises or machinery – these cannont be immediately converted into a cash.

Liabilities

Liabilities are monies owed by the company, this includes all debts and obligations to outside creditors, vendors, or banks that are payable within one year. Liabilities also include the business owners’ equity (i.e. monies invested in the company.)

 

 
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