Balance Sheet

• A statement of what you own, what you owe.
• Fundamental Accounting Equation: Assets = Liabilities + Owners Equity
• What a company owns vs how it paid for its assets
• Always a point in time
• Usually for entire company

Asset

• Current Assets - Can be turned into cash in less than one year
  • Cash and Cash Equivalents
  • Accounts Receivable
  • Inventory
• Long-term Assets - Useful life more than one year
• PPE - Property, Plant and Equipment
  • Sum of ALL capital expenditures
  • Minus all accumulated depreciation
  • From the first day of the business
• Goodwill
  • Created by acquiring another company
  • Difference between price paid and net assets of acquired company
  • Not amortized (Goodwill Impairment Evaluation
• Intellectual Property, Patents, and Other Intangibles
• Accruals and Prepaid Assets

Liabilities

• Current liabilities - must be paid within one year
  • Short-term loans, typically secured by current asset
  • Current portion of long-term debt
  • Accounts Payable (AP)
  • Accrued Expenses (Liabilities) - expenses incurred but not yet paid
  • Deferred Revenue
• Long-Term Liabilities
  • Loans
  • Bonds
  • Deferred Compensation
  • Deferred Taxes

Owner’s Equity

• Stock (for contributed cash)
  • Common stock - generally has voting rights, dividend at company discretion
  • Preferred stock - first rights to dividend, no voting rights
• Retained Earnings
  • Net Income/Losses - Dividends, for the lifetime of the business
  • Owners keep this - they own the company