What is a Balance sheet?
A balance sheet is a financial statement that shows the relationship between assets, liabilities, and shareholders’ equity of a company at a specific point in time.
Balance sheet are useful tools for individual and institutional investors, as well as key stakeholders within an organization, as they show the general financial status of the company.
It is also possible to grasp the information found in a balance sheet to calculate important company metrics, such as profitability, liquidity, and debt-to-equity ratio.
How Balance sheets work
A balance sheet is guided by the accounting equation
Accounting Equation
Assets= Liabilities + Shareholders’Equity
Both parts should be equal to each other or balance each other out. This means that the assets of company should equal its liabilities plus any shareholders’ equal that has been issued. Hence, a balance sheet should always balance.
The revenues of the company in excess of its expenses will go into the shareholders equity account.
These revenues will be balanced on the asset side of the equation, appearing as inventory, Cash, investments, or other assets.
Components of a balance
A balance sheet has three primary component: Assets, Liabilities, and Shareholders’ equity.
Assets are anything the company owns that holds some quantifiable value, which means that they could be liquidates and turned into cash. These can include cash, investments, and tangible objects.
Companies divide their assets two categories: current assets and noncurrent (long-term) assets.
Current Assets
Current assets are typically those that a company expects to convert easily into cash within a year.
These assets include cash and cash equivalents, prepare expenses, account receivable, marketable securities, and inventory.
Non-Current Assets
Non-Current Assets are long-term investments that the company does not expect to convert into cash within a year or have a lifespan of more than one year.
Non-Current Assets are long-term investments that the company does not expect to convert into cash within a year or have a lifespan of more than one year.
Liabilities
Liabilities are anything a company owes. These are loans, accounts payable, bonds payable, or taxes.
Like assets, liabilities can be classification as either current or noncurrent liabilities.
Current liabilities
Current liabilities refers to the liabilities of the company that are due or much be paid within one year.
This may include account payables, rent and utility payments, current debts or notes payables, current portion of long-term debt, and other accrued expenses.
Noncurrent Liabilities
Noncurrent or long-term liabilities are debts and other non-debt financial obligations that a company does not expect to repay within one year from the date of the balance sheet.
This may include long-term loans, bonds payable, leases, and deferred tax liabilities.
Shareholder’s Equity
Shareholder’s equity is the net worth of the company and reflects the amount of money left over if all liabilities are paid, and all assets are sold.
Shareholder’s equity belong to the shareholders, whether public or private owners.
Retained Earnings
Shareholder’s equity reflects how much a company has left after paying its liabilities.
If the company wanted to, it could pay out all of that money to its shareholders thought dividends. However, the company typically reinvests the money into the company. Retained earnings are the money that the company keeps.
Share Capital
Share capital is the value of what investors have invested in the company.
For insurance, if someone invests Rs.1000 to help you start a company, you would count that Rs.1000 in your balance sheet as your cash assets and as part of your share capital.
Common stock is those that people get when they buy stock through the stock market. Preferred stock, on the other hand, provides the shareholders with a greater claim on the company’s assets and earnings.
You can also see treasury stock on a balance sheet. This stock is a previously outstanding stock that is purchased from stockholders by the issuing company.
There are four types of balance sheet report format available.
Balance Sheet Period Wise summary
List of reports (Balance Sheet Jasper, Balance Sheet-Jasper format 1, Balance Sheet Landscape-Jasper, Balance Sheet Language-Jasper).
Example: 1 Balance Sheet Jasper model report given below.
Then “How to Generate Balance sheet summary” in Fresa Application.
Step 1. Login with Fresa Application, go to the accounts module and click balance sheet report.
Step 2. Click the balance sheet summary.
Step 3. Select the required branch and click submit button.
Step 4. Balance sheet summary will be displayed on the page.
The below links are for Balance sheet report related blogs for Fresa application.
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