A balance sheet is a snapshot of a company’s assets, liabilities and shareholders’ equity at one point in time. It is often used to compare financial health of two companies or identify areas where a company may need to improve its finances.
Balance sheets are an essential tool for business leaders, accountants and investors. They reveal how a company has accumulated its money (assets) by either borrowing (liabilities) or getting it from its shareholders or investors (equity).
The left side of the balance sheet lists a firm’s itemized assets, separated by long-term vs. short-term, and the right side lists a company’s liabilities and shareholder’s equity. Liabilities are often broken down into current and long-term liabilities based on their payment due dates. Current liabilities can also be further broken down into accounts payable and accrued expenses. Long-term liabilities are items like debts, tax payments and pensions. Investors’ equity is a company’s total value of shares plus its retained earnings.
As a general rule, the left side of the balance sheet (assets) must equal the right side (liabilities + owners’ equity). If you are unsure about the format of your company’s balance sheet or want to learn more about how a company prepares its financial statements, consult an accountant in your area. The FreshBooks Support team is not certified income tax or accounting professionals and cannot provide advice on these matters, outside of helping you get started with FreshBooks. If you have specific questions, please speak with an accountant or contact your local government agency. Bilanz
