Personal Money Management 101
How to Read a Financial Statement : Balance Sheet
Financial StatementsIntroduction Profit & Loss Balance Sheet Cash Flow Key Ratios Real Estate Mortgages Retirement Planning Debt Solutions FOREX Trading Financial Derivatives Tax Efficiency Financial Advisors Personal Finance Articles Software & Books Site Map Resources on the Web
The Balance Sheet is a snapshot of a business's financial position (what it owes and owns) at a particular moment in time.
The Balance Sheet is based on the accounting equation:
Assets = Liabilities + Owners' Equity
Fixed assets are assets that a business does not buy/sell as part of its business.
Tangible assets are physical things, eg buildings, machinery etc.
Intangible assets include brand names, patents, licences, goodwill (the amount by which the price of a business exceeds its assets) etc.
Current assets are assets that can be converted to cash within a year, eg inventory (stocks of goods for sale or raw material), debtors (money not yet received for sales), investments, cash etc.
Cureent Liabilities are debts due in the next 12 months, eg creditors (money owed to suppliers), accrued expenses (phone, rent... incurred but not yet paid), outstanding dividends, tax due within next year.
Long Term Liabilities money owed but not due within next year, eg bank loans.
Net Current Assets (working capital) =
Total Assets less Current Liabilities =
Net Assets = Total Assets - Total Liabilities.
Shareholder's funds (owners' equity) must equal net assets.
Share Capital is the money put into the business by shareholders.
Retained Profit is the cumulative retained profit from the Profit and Loss Account since the business started.
Revaluation Reserve results from a business revaluing assets (eg buildings) at current rather than original costs.