A balance sheet is a financial statement, also known as a “statement of financial position” that report a summary of all business assets (what the business owns) and liabilities (what the business owes) at a particular point in time.

The balance sheet is one of three core financial statements (profit and loss statement and statement of cash flows, being the other two) that are used to evaluate a business’s financial performance, position, and value.

The balance sheet consists of three sections that can be represented by the following formula:

Assets – Liabilities = Owner’s Equity

Assets include:

  • Cash at bank
  • Petty cash
  • Stock/Inventory
  • Account receivables (trade debtors)
  • Short-term investments
  • Property and buildings
  • Plant & equipment
  • Motor vehicles
  • Office equipment
  • Goodwill
  • Intellectual property
  • Patents and trademarks

Liabilities include:

  • Credit cards & overdrafts
  • Short-term loans
  • Account payables (trade creditors)
  • Money payable to ATO
  • Money payable to employee’s Superfunds
  • Long-term loans
  • Director’s loans (to the business)

Owner’s equity
The owner’s equity (shareholder’s equity) is the residual part of the business that belongs to the owners after deducting all liabilities from the total assets.

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