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the Balance Sheet

The balance sheet (also known as the Statement of Financial Position and the Statement of Financial Condition) summarizes the assets, liabilities and equity at a specific point in time. The balance sheet gives investors an idea of what an entity owns and owes as well as the amount invested by owners.

The balance sheet helps compute the rates of return, evaluate the capital structure, ascertain risk and cash flows, as well as, analyze the businesses: Liquidity, Solvency, and Financial Flexibility

Elements of the Balance Sheet
Assets Liabilities Equity
  • Current assets
  • Long-term investments
  • Property, Plant, and Equipment
  • Intangible assets
  • Other assets
  • Current liabilities
  • Long-term debt
  • Capital stock
  • Additional paid-in capital
  • Retained earnings

Current Assets

Cash and other assets capable and intended of being converted to cash or consumed within a year or operating cycle, whichever is longer. Current assets are presented in order of their liquidity. Cash equivalents are short-term highly liquid investments that will mature within three months, often Cash and cash equivalents is used as a caption in lieu of Cash.

Short-term investment

Short-term investments are any investments that an entity has made that will expire within one year. These could be stocks or bonds that are easily liquidated.

Long-term investment

Long-term investments are not normally disposed of for a long period in time

Property, Plant and Equipment

Property used in the regular operations of the enterprise

Intangible assets

Lack physical substance and are not financial instruments, but benefit the holder. Examples are: patents, copyright, franchises, goodwill, trademarks, and secret processes.

Other Assets

These include items that do fit into the other classifications

Current liabilities

Obligations that are expected to be liquidated either with current assets or the creation of other current liabilities

Long-term liabilities

Obligations that extend beyond one year or the operating cycle, whichever is longer

Capital stock

The par value of shares issued

Additional paid-in capital

The amount paid in over the par value of stock

Retained earnings

The undistributed earnings

Entity Name
Balance Sheet
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