Balance Sheet (Financial Statements)

A balance sheet also known as the statement of financial position tells about the assets, liabilities and equity of a business at a specific point of time. It is a snapshot of a business.

A balance sheet is an extended form of the accounting equation. An accounting equation is:

Assets = Liabilities + Equity

Assets are the resources controlled by a business, equity is the obligation of the company to its owners and liabilities are the obligations of parties other than owners.

A balance sheet is named so because it lists all resources owned by the company and shows that it is equal to the sum of all liabilities and the equity balance.

A balance sheet has two formats: account form and report form.

An account form balance sheet is just like a T-account listing assets on the debit side and equity and liabilities on the right hand side. A report form balance sheet lists assets followed by liabilities and equity in vertical format.

The following example shows a simple balance sheet based on the post-closing trial balance of Company A.

Company A
Balance Sheet
As on December January 31, 2011
ASSETS			LIABILITIES AND EQUITY
Current Assets:			Liabilities:
Cash	$20,430		Accounts Payable	$5,200
Accounts Receivable	5,900		Utilities Payable	3,964
Office Supplies	4,320		Unearned Revenue	1,000
Prepaid Rent	24,000		Interest Payable	150
Total Current Assets	$54,650		Notes Payable	20,000
Non-Current Assets:			Total Liabilities	$30,314
Equipment	$80,000		Common Stock	100,000
Accumulated Depreciation	−1,100		Retained Earnings	3,236
Net Non-Current Assets	$78,900
Total Assets	$133,550		Total Liabilities and Equity