Accounting



Explanation of the Topic...

Balance Sheet

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Part 1 Introduction to the Balance Sheet, Assets
Part 2 Liabilities
Part 3 Owner's (Stockholders') Equity
Part 4 Sample Balance Sheet, Notes To Financial Statements, Financial Ratios

A Sample Balance Sheet




Most accounting balance sheets classify a company's assets and liabilities into distinctive groupings such as Current Assets; Property, Plant, and Equipment; Current Liabilities; etc. These classifications make the balance sheet more useful. The following sample balance sheet is a classified balance sheet.



Sample Balance Sheet:



Example Company
Balance Sheet
December 31, 2006


ASSETSLIABILITIES
Current AssetsCurrent Liabilities
Cash$   2,100 Notes Payable$   5,000 
Petty Cash100 Accounts Payable35,900 
Temporary Investments10,000 Wages Payable8,500 
Accounts Receivable - net40,500 Interest Payable2,900 
Inventory31,000 Taxes Payable6,100 
Supplies3,800 Warranty Liability1,100 
Prepaid Insurance     1,500 Unearned Revenues     1,500 
Total Current Assets   89,000  Total Current Liabilities    61,000 
-
Investments   36,000 Long-term Liabilities
Notes Payable20,000 
Property, Plant & EquipmentBonds Payable  400,000 
Land5,500 Total Long-term Liabilities  420,000 
Land Improvements 6,500 
Buildings180,000 
Equipment201,000 Total Liabilities  481,000 
Less: Accum Depreciation   (56,000)
Prop, Plant & Equip - net  337,000 
-
Intangible AssetsSTOCKHOLDERS' EQUITY
Goodwill105,000 Common Stock110,000 
Trade Names  200,000 Retained Earnings229,000 
Total Intangible Assets  305,000 Less: Treasury Stock   (50,000)
Total Stockholders' Equity  289,000 
Other Assets     3,000 
-
Total Assets$770,000 Total Liabilities & Stockholders' Equity$770,000 



 The notes to the sample balance sheet have been omitted.




Notes To Financial Statements

The notes (or footnotes) to the balance sheet and to the other financial statements are considered to be part of the financial statements. The notes inform the readers about such things as significant accounting policies, commitments made by the company, and potential liabilities and potential losses. The notes contain information that is critical to properly understanding and analyzing a company's financial statements.


It is common for the notes to the financial statements to be 10-20 pages in length. Go to the website for a company whose stock is publicly traded and locate its annual report. Review the notes near the end of the annual report.



Financial Ratios

A number of important financial ratios and statistics are generated by using amounts that are taken from the balance sheet. For an illustration of some of these computations see our Explanation of Financial Ratios.



Additional Information and Resources

Because the material covered here is considered an introduction to the topic of balance sheet, there are many complexities not presented. You should always consult with an accounting professional for assistance with your own specific circumstances.



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