Balance Sheet Explained: Assets, Liabilities and Stockholders Equity

A Balance Sheet is a financial statement as of a certain date which demonstrates a company's financial condition. It is also referred to as the statement of financial position. Watch this Video Next ➡️ • Notes Receivable vs No...
✅Supporting Information
The balance sheet breaks down into the following 5 categories: Current Assets, Current Liabilities, Noncurrent Assets, Noncurrent Liabilities and Stockholders Equity. #accounting #balancesheet #patrickbraycpa #financialreporting
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PART 1: Current assets on the balance sheet are assets that are cash or can/will be converted into cash within a year.
5 Examples of Current Assets explained:
1) Cash: bank cash balances or any cash account that holds the company's currency
2) Accounts Receivable: goods or services incurred and earned which haven't been collected as of the balance sheet date
3) Prepaids: a expense paid in advance by a company where the good or service has a useful life beyond the balance sheet date
4) Trading Securities: bonds and stocks which will be sold within a year
5) Inventory: parts (such as raw materials) or finished products (the product/item for sale)
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PART 2: Current Liabilities are classified as money owed to another party which is due within a year.
5 Examples of Current Liabilities explained:
1) Accounts Payable: trade goods and services which have been incurred and are unpaid as of the balance sheet date
2) Accrued Expenses: expense incurred, but not paid or entered through accounts payable
3) Accrued Payroll: compensation that has been earned, but not paid
4) Current portion of long term debt: principal owed within a year
5) Unearned Revenue: cash received before goods and/or services have been performed and/or earned with the next 12 months
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PART 3: Noncurrent assets have an economic value beyond a year.
5 examples of Noncurrent assets explained:
1) Fixed Assets: tangible and physical assets used in the business that are depreciated over their useful life
2) Land: physical land owned
3) Intangible Assets: a non-physical asset that has value like a copyright, trademark or tradename
4) Goodwill: value of an acquisition over net assets purchased
5) Held-to-Maturity Investments: debt investments to maturity which are held at cost
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PART 4: Noncurrent Liabilities are classified as money owed to another party which is due past 1 year of the balance sheet date.
5 Examples of Noncurrent Liabilities explained:
1) Notes Payable: typically a promissory note
2) Mortgage Payable: financing for purchase of a property
3) Bank Debt: debt issued by a commercial bank
4) Bonds Payable: debt instrument used to raise capital for a business
5) Shareholder note payable: debt owed to a shareholder for redeeming shares of stock
✅Supporting Video:
➡️5 Examples of Current Liabilities found on the Balance Sheet
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PART 5: The Stockholders Equity section of the balance sheet consists of share activity such as Authorized shares, Issued shares and Outstanding shares. Also in the Stockholders Equity section of the Balance Sheet you'll find retained earnings from the business.
5 Examples of Stockholders Equity explained:
1) Par Value Stock: shares of stock that have been issued and are outstanding at the corporation's par value
2) Additional Paid-In Capital: contributions made by shareholders and/or owners above the par value of the corporation's stock
3) Treasury Stock: stock redemptions retired by the company
4) Retained Earnings: this is cumulative net income (from Income Statement) less cumulative dividends paid out by the entity
5) Dividends
✅Supporting Video:
➡️5 Examples of Noncurrent Liabilities found on the Balance Sheet
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Chapters
0:21 Current Assets
5:16 Current Liabilities
11:47 Noncurrent Assets
23:21 Noncurrent Liabilities
31:18 Stockholders Equity