A balance sheet is a snapshot of your business’s financial position at a given point in time. It’s one of three core financial statements (income statement and cash flow statement being the other two) used by investors and stakeholders to assess your company’s performance. Using the information on your balance sheet, you can perform ratios like current assets to current liabilities and calculate your debt-to-equity ratio. You can also compare your latest balance sheet to previous ones to see how your company’s finances have evolved over time.
The balance sheet consists of several accounts categorized under two headings: Assets and Liabilities. The exact breakdown of each account will depend on your chart of accounts, but most businesses have the following basic categories:
Assets are what your company owns and adds to its wealth. They are further classified into current and noncurrent assets based on their convertibility into cash. Current assets are those you can sell or turn into cash within a year, including short-term deposits and marketable securities. Noncurrent assets include fixed assets such as buildings and machinery.
Liabilities are amounts that your company owes to its creditors. These are further subdivided into current and long-term debt. Long-term debt includes any debt maturing over a period of more than a year. Current debt includes accounts payable and accrued expenses. Other long-term debts include the purchase price of inventories, receivables and notes payable.
Your owner’s equity is the amount you invested directly into your company and any portion of retained earnings converted to paid-in capital. As a corporation, your stockholders’ equity is distinct from your personal assets because your creditors cannot look to your personal property to satisfy claims against your company. Bilanz Hattingen