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A balance sheet is a financial snapshot of your business at a particular point in time. Below you will find a detailed description and explanation of the items commonly found on a balance sheet.
Things of worth to the business. Examples include cash, inventory, land, and equipment.
Current assets: Assets which are either cash, will turn into cash, or will be used up within one year.
Cash: The amount of cash on-hand in the business.
Accounts receivable (net): Money owed to the business by customers for credit sales (net of bad debt).
Inventory: Items the business owns and intends to sell to customers.
Total current assets: The sum of all current assets.
Property, plant and equipment (net): Land, buildings, and equipment owned by the business (net of depreciation). Land is not depreciated.
Other assets (net): Deposits and start-up costs (net of amortization). Organizational costs are amortized, or expensed, over 5 years. Deposits are not amortized.
Total assets: The sum of all assets.
The debt the business owes and the owner's investment in the business.
Current liabilities: The balance of debt the business must pay within one year.
Accounts payable: The amount owed for inventory purchased on credit from suppliers. The Balance Sheet may indicate a balance if the business requires inventory and credit terms of net 30 or longer have been established.
Line of credit: A short-term loan that extends the cash available to the business.
Notes payable: Formal loans due in less than one year.
Current maturities: The sum of principal payments from long-term debt due in less than one year. The value shown is net of interest expense.
Total current liabilities: The sum of all current liabilities.
Long-term liabilities (net): The sum of principal payments from long-term debt due beyond one year (net of interest expense). Long-term liabilities are formal loans where the term of the loan is greater than one year.
Total liabilities: The total amount owed by the business.
Equity: The owner's investment in the business.
Total liabilities and equity: The total investment in the business by the owner(s) and creditor(s).
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