BALANCE SHEET
By Bruce J. Blanding

The basic accounting equation, Assets = Liabilities + Capital, is represented on the Balance Sheet. Figure 5-1, below, is an example of a Balance Sheet. Notice the date at the top. On the Profit and Loss Statement, the dates covered a period of time. The Balance Sheet, on the other hand,represents the balance in asset, liability, and capital accounts at a specific time. The Balance Sheet is like a snapshot of that business.

Assets
Anything of value owned or due the company is considered an asset. Generally, on the Balance Sheet, assets are divided into current assets and fixed assets.

Current Assets
Cash and resources that can be easily converted into cash within one year are considered current assets. The cash entry on the Balance Sheet includes all cash the business has on hand and in demand deposits (bank accounts).

 Accounts Receivable are the current amounts owed to the business by customers for credit purchases. This figure should be adjusted downward slightly to allow for bad debts or accounts that will turn out to be uncollectible.

 Inventory consists of the merchandise currently available for sale as of the date of the Balance Sheet.
Figure 5-1
Balance Sheet - December 31, 200-
ABC  Company
Current Assets:

 
Cash

$2,320
Accounts Receivable

$1,460
Inventory

$9,320
Pre-paid Expenses

$300
TOTAL CURRENT EXPENSES

$13,400
Fixed Assets:

 
Delivery Equipment

$15,000
Furniture & Fixtures

$4600
TOTAL FIXED ASSETS

$19,600
TOTAL ASSETS

$33,000
Liabilities:

 
Accounts Payable

$ 6,430
Notes Payable

2,320
Payroll Tax Payable

150
Sales Tax Payable

1,900
TOTAL LIABILITIES

$10,800
Capital:

 
Owner's Equity

22,200
TOTAL LIABILITIES & CAPITAL  

$33,000
 
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