Starting a Small Business

Accounting Terms: Balance Sheet

by
Delia Mena
on
5/4/2015
Accounting Terms: Balance Sheet

Balance sheet is a term used to describe a document that gives a snapshot of a company's financial position. It provides a summary of assets and liabilities for a specific period of time, as well as of shareholder equity. A balance sheet is broken down into three segments so that those who are considering investing have a straightforward and clear sense for what its financial position is, and specifically with regard to how much is owed and owned, and how much shareholders have already invested in the company's future.

All balance sheets are formulated in the same way in order to present their information efficiently. On one side of the sheet are all assets, and on the other side are shareholder's equity and liabilities. It is essential that the latter two add up to the same figure as the first, and that is why it is called a balance sheet - because both sides should balance out and total the same number. A balance sheet is important because it shows that a company is able to pay for all of its assets through the investments that its shareholders have made minus the money represented by its debts.

When a balance sheet is assembled, it is made up of three different segments: assets, liabilities and shareholder equity, and each of those segments will have different accounts with different values. The asset side of the sheet will include inventory, property and cash, while liability will include accounts payable and long-term debts. Every company and industry's balance sheets will be somewhat different because of different types of requirements and assets needed in different industries, but despite the fact that there is no set template for a balance sheet format, they will all contain the same essential information.

If you are considering investing in a company and need help understanding the information provided on its balance sheet, an accounting professional can help. Call Delia Mena at Tampa Accounting, (813) 600-3199, for immediate assistance.

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Delia Mena

Delia Mena

Delia Mena, CPA is a Tampa based tax professional who specializes in accounting and tax preparation. Delia is the founder of her own tax based practice, Delia's Accounting Service, based in Tampa, FL. With over 12 years of experience, Delia's practice is fully equipped to assist clients with any of their financial needs. Delia's Accounting Service provides the perfect mix of independent paralegal's, bookkeepers, and notary public professionals providing high quality services to a wide range of clients. To learn more about Delia and her practice, visit her website.

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