Explanation of the Topic...

Balance Sheet

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

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, 2007

ASSETS				LIABILITIES
Current Assets				Current Liabilities
	Cash		$ 2,100		Notes Payable		$ 5,000
	Petty Cash		100		Accounts Payable		35,900
	Temporary Investments		10,000		Wages Payable		8,500
	Accounts Receivable - net		40,500		Interest Payable		2,900
	Inventory		31,000		Taxes Payable		6,100
	Supplies		3,800		Warranty Liability		1,100
	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 Payable		20,000
Property, Plant & Equipment					Bonds Payable		400,000
	Land		5,500			Total Long-term Liabilities	420,000
	Land Improvements		6,500
	Buildings		180,000
	Equipment		201,000	Total Liabilities			481,000
	Less: Accum Depreciation		(56,000)
		Prop, Plant & Equip - net	337,000
-
Intangible Assets				STOCKHOLDERS' EQUITY
	Goodwill		105,000		Common Stock		110,000
	Trade Names		200,000		Retained Earnings		229,000
		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 this topic, many complexities have been omitted. You should always consult with an accounting professional for assistance with your own specific circumstances.

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