Balance Sheet:

If you want to invest in some company or want to be a shareholder then it is imperative that you understand the balance sheet of the particular company. For your information Balance sheet is just one part of the company’s financial statement. you must later learn income Statment and cash flow statement.

Balance Sheet shows a statement of financial position or a network at a particular point in time. Balance Sheet of any company is shown in the below equation:

Assets = Liabilities + Shareholders’ Equity

Assets can be current assets or non-current assets that are mostly there to operate the business whereas Liabilities and Equities are the two major source of finance. In public traded company equities or Capital is normally the initial funds invested by the owner of the business plus the retain earning.

Let Us Look at the example of how balance sheet is normally set up:

 

Lets us now try to understand each elements of the balance Sheet:

1. Current Assets: 

Current assets involved those assets that can be easily turn into cash within a period of less than a year. As shown in above table what we can find under Current assets are

-Stock and inventories (assets which are trying to sell off)

-Cash in hand or banks which are very liquid in nature

-Debtors or you can also say Account receivable.

 

2. Non-Current Assets: 

These are mainly tangible assets that are required to operate the business-like 

building for office space, machinery, tables and chairs ets.

 

3. Current Liabilities:

those amounts that the company owes to the third parties and needs to pay them back within 12 months periods as per balance sheet. this would be mainly short term borrowing which needs to settle in within a year time. third parties are mainly Creditors (accounts Payable) and business suppliers ( yet to be paid to the suppliers who have already provided the goods and services.

 

4. Non-Current Assets: L

In short term This means a Long term liabilities. the business has borrowed a long term loan which can be paid in distance future. like payable method can be more than 12 months