Balance Sheet

The Balance Sheet is a snapshot of a firm’s position at a specific point in time. It is referred to as balance sheet because of the accounting equation Assets must equal the total of Liabilities plus Equity.

Assets = Liabilities + Equity

Assets

An asset is a resource with economic value that is owned or controlled with the expectation it will provide future economic benefits.

The asset section of the balance sheet is usually organized from the most liquid assets to the least liquid asset. The two major sets of assets are current and long-term. Current assets are cash, cash equivalents and assets that can be converted to cash within one year. Long-term assets are those whose useful lives are greater than one year.

Liabilities

A liability is the probable future sacrifice of economic benefits arising from present obligations to other entities.

The liabilities section of the balance sheet is organized from the nearest due dates to the farthest due dates. Liabilities are usually classified as either Current Liabilities, those due within one year, or Long-term Debt.

Stockholder's Equity

Equity is the portion of a company’s value that belongs to the owners.

The two important parts of the equity section of the balance sheet are contributed capital and retained earnings. Contributed capital includes common stock, preferred stock and additional paid in capital. Retained earnings is the profit that has been earned but not distributed.

Entity Name
Balance Sheet
Date
Assets
Current Assets
Cash		$ 72,186
Trading Securities		16,941
Accounts Receivable	$ 298,236
Less: Allowance for doubtful accounts	2,730	295,506
Notes Receivable		30,000
Inventories		687,371
Supplies		12,885
Prepaid Rent		33,000
Total Currant Assets			$ 1,147,889

Long-term assets
Equity Investments		115,000
Bonds		75,000
Total Long-term assets			190,000

Property, plant, and equipment
Land		15,000
Buildings	175,000
Less: Accumulated depreciation	52,500	122,500
Machinery	66,000
Less: Accumulated depreciation	13,000	53,000
Total Property, Plant, and Equipment			290,500

Intangible assets
Goodwill			80,000
Total Assets			$ 1,708,389

Equity and Liabilities
Current liabilities
Accounts payable		$ 191,000
Notes payable (Due in current year)		65,000
Accrued interest on notes payable		650
Income tax Payable		64,000
Accrued salaries and wages		7,650
Deposits received from customers		1,200
Total current liabilities			$ 329,500

Long-term debt
20 year 8% Bonds due in 3 years			600,000
Total Liabilities			929,500

Stockholders' Equity
Common stock $10 par value	$ 500,000
Additional paid in capital	128,889	628,889
Retained earnings		110,000
Accumulated other comprehensive income		40,000
Total Stockholders' Equity			778,889
Total liabilities and Stockholders' equity			$ 1,708,389

the Blog

February 17/2014

An entities debts and obligation that are not due within one year or business cycle, whichever is longer. To learn more visit Long-Term Liabilities - Accounting Actualities

February 10,2014

Companies must use the percentage-of-completion methods when estimates of progress toward completion, revenue, and costs are reasonably and dependably; as well as the following conditions exist. Learn more at Revenue Recognition - Accounting Actualities

February 3, 2014

Transactions are initially recorded in a journal (also called the book of original entry). Journals are kept in chronological order and list transactions in terms of debits and credits to accounts. Besides a general journal businesses may have specialized journals: sales journal, purchases journal, cash receipts journal, cash payments journal… For more visit Accounting Cycle - Accounting Actualities

January 17, 2014

The Ledger is a book of accounts in which data from transactions recorded in journals are posted and thereby classified and summarized. A general ledger is a collection of all accounts. A subsidiary ledger contains the details related to a single general ledger account.

The accounting system is built from a collection of components referred to elements. Read about them on the elements page at Accounting Actualities.

January 10, 2014

The assumptions in the Conceptual Framework for Financial Reporting are:

Economic entity assumption- The economic activity of the entity is treated distinct and separate from its owners.

Going concern assumption- The absence of information that the entity is not able to continue indefinitely. That the entity has enough income and assets to cover foreseeable obligations.

Monetary unit assumption- The currency used to measure economic activity is going to remain relatively stable, permitting the disregard of inflation or deflation in the environment the entity operates in.

Periodicity assumption- The life of the entity can be divided into time periods for the providing financial reports, this period is usually a year, a quarter, or a month.

See more at about the Conceptual Framework at Accounting Actualities.

January 3, 2014

Generally Accepted Accounting Principles (GAAP) are the ruling accounting principles, standards and procedures that regulate financial accounting. For an understanding of the Codification and the history of GAAP, visit Account Actualities. You will find it time well spent.