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What is a Balance Sheet?

Balance Sheet

What a company owns and owes at one time.

A snapshot of its financial situation.

What Balance Sheets Show

Company’s Assets + Company’s Liabilities = Owner’s equity

What Are Assets?

Company’s belongings that have future economic value in dollars:

  • Cash
  • Inventory
  • Land
  • Accounts Receivable
  • Supplies
  • Goodwill
  • Patents, Copyrights, Trademarks

What Are Liabilities?

Things that the company owes to other parties:

  • Accounts Payable
  • Salaries Payable
  • Customer Deposits
  • Bonds Payable
  • Tax Payments
  • Warranty Payments

What is Owner’s Equity

The source of the company’s assets.

Assets – Liabilities = Owner’s Equity

The money you would have left over if you sold your company:

  • Paid-in Capital
  • Retained Earnings

Why Important?

Bankers can use to figure out if a business is on the right track for loans or credit.

A balance sheet reveals a company or person’s net worth.

Assets – Liabilities = Net Worth

The Person with the highest net worth in the world is Bill Gates, over $79 Billion, enough to buy every home in Boston.


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