Balance Sheet
The accounting balance sheet is one of the major financial statements used by accountants and business owners. (The other major financial statements are the income statement, statement of cash flows, and statement of stockholders' equity) The balance sheet is also referred to as the statement of financial position.
The balance sheet presents a company's financial position at the end of a specified date. Some describe the balance sheet as a "snapshot" of the company's financial position at a point (a moment or an instant) in time.
Because the balance sheet informs the reader of a company's financial position as of one moment in time, it allows someone—like a creditor—to see what a company owns as well as what it owes to other parties as of the date indicated in the heading. This is valuable information to the banker who wants to determine whether or not a company qualifies for additional credit or loans. Others who would be interested in the balance sheet include current investors, potential investors, company management, suppliers, some customers, competitors, government agencies, and labor unions.
Assets
Assets are things that the company owns. They are the resources of the company that have been acquired through transactions, and have future economic value that can be measured and expressed in dollars. Assets also include costs paid in advance that have not yet expired, such as prepaid advertising, prepaid insurance, prepaid legal fees, and prepaid rent.
Examples of asset accounts that are reported on a company's balance sheet include:
• Cash
•Petty Cash
•Temporary Investments
•Accounts Receivable
•Inventory
•Supplies
•Prepaid Insurance
•Land
•Land Improvements
•Buildings
•Equipment
•Goodwill
•Usually asset accounts will have debit balances.
Contra assets are asset accounts with credit balances. (A credit balance in an asset account is contrary—or contra—to an asset account's usual debit balance.) Examples of contra asset accounts include:
•Allowance for Doubtful Accounts
•Accumulated Depreciation-Land Improvements
•Accumulated Depreciation-Buildings
•Accumulated Depreciation-Equipment
•Accumulated Depletion
•Etc.
