Basics on Balance Sheet

Basics on Balance Sheet

A balance sheet offers an overview of a business’s financial status of a particular time. It tells you about the business’s assets, liabilities, and capital. The assets need to be equal to the total of the liabilities and the business’s equity from shareholders.

The purpose of a balance sheet is to identify the financial strength of the company (Also see The Balance Sheet and the Profit & Loss Account). It tells you how stable, financially, your company is. Regularly, you will discover yourself depending on the balance sheet when making a decision and in preparation of other financial statements.

What Are Assets?

Assets are the properties owned by your company. There are two classifications of assets: current assets and long-term assets. The cash in your company is described as the current asset due to high liquidity. Since machinery and other properties like real estates take a longer duration to liquidate, they are counted as long-term assets. Other examples of current assets are account receivables and cash on hand (Also see What Is Cash Flow?). These assets usually are transformed to cash in one fiscal year.

Fixed assets depreciate over time. For instance, machinery and buildings tend to lower in worth with time. Some assets, such as land increase its value with time. The typical types of fixed assets in a company are the machinery, vehicles and workplace equipment. None of these is easily convertible to cash within one fiscal year of the company.

What Are Total Assets?

The total assets of a company are when you add all the current and fixed assets your business owns. This is what you need to record and report on your balance sheet. The quantity you receive does not represent the current fair market price, but the purchase cost of the assets.

Owners’ Equity and Liabilities

Liabilities are the company’s obligations to the outside world. Owners’ equity is the amount when you deduct the debt quantity from the total assets. These liabilities and debts are to be paid in one year for short-term liabilities or after one year for long-lasting liabilities. For example, the debts from creditors and suppliers’ accounts, accrued wages, accounts payable, shareholders deposits and income account payable.

A balance sheet is a crucial financial statement that usually prepared by accounting firm in Singapore. The balance sheet reveals the business financial position at a specific time. Hence, you need to guarantee that it is made correctly, and you may look for any accounting services in Singapore for further guidance.

Leave a Reply

Your email address will not be published. Required fields are marked *