Difference between revisions of "Balance sheet"
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The ''Report'': | The ''Report'': | ||
*Provides the owners, managers, and other authorized [[stakeholder]]s with definite information on how much [[owner's equity]] is in the business, how many [[assets]] the business owns, and what the business owes in [[liabilities]] as of a specific date. | *Provides the owners, managers, and other authorized [[stakeholder]]s with definite information on how much [[owner's equity]] is in the business, how many [[assets]] the business owns, and what the business owes in [[liabilities]] as of a specific date. | ||
| − | *Is a snapshot in time | + | *Is a snapshot in time. Although the ''Report'' itself doesn't provide any information on the entity's dynamics, it is always used in further analysis, most likely, with one or more of the past ''Reports''. |
*Gives ideas about entity's liquidity, solvency, and financial flexibility. | *Gives ideas about entity's liquidity, solvency, and financial flexibility. | ||
*May count tangible items such as cash, property, equipment, and inventories, as well as intangible items such as goodwill, trademarks, and patents. | *May count tangible items such as cash, property, equipment, and inventories, as well as intangible items such as goodwill, trademarks, and patents. | ||
Revision as of 03:54, 5 November 2019
Balance sheet (alternatively known as statement of financial position; hereinafter, the Report) is a financial report, as of a particular date, that shows the amount of assets owned by a legal entity as well as the amount of claims (both liabilities and owner's equity) against these assets. The Report falls in line with the basic accounting equation.
Definitions
According to College Accounting: A Practical Approach by Slater (13th edition),
- Balance sheet (also known as statement of financial position). A financial statement, as of a particular date, that shows the amount of assets owned by an organization as well as the amount of claims (liabilities and owner's equity) against these assets.
According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),
- Balance sheet. A statement of the firm's financial position at a specific point in time. The firm's assets are listed on the left-hand side of the balance sheet; the right-hand side shows its liabilities and equity, or the claims against these assets.
Purposes
The Report:
- Provides the owners, managers, and other authorized stakeholders with definite information on how much owner's equity is in the business, how many assets the business owns, and what the business owes in liabilities as of a specific date.
- Is a snapshot in time. Although the Report itself doesn't provide any information on the entity's dynamics, it is always used in further analysis, most likely, with one or more of the past Reports.
- Gives ideas about entity's liquidity, solvency, and financial flexibility.
- May count tangible items such as cash, property, equipment, and inventories, as well as intangible items such as goodwill, trademarks, and patents.
Related concepts
- Bookkeeping. Recording, filing, and retrieving of financial data, as well as producing those financial reports that are required by laws.
