The balance sheet tracks the assets and liabilities of a company and is one of the three major financial statements. It’s a very important concept to understand in your first year of accounting school. Our balance sheet example provides an introduction to the balance sheet and a template you can follow in your accounting course.
The balance sheet shows relative balance between what a company owns and what it owes. This is key information for bankers or external auditors who want to understand the risk a company faces. Key items on the balance sheet include resources the company has acquired, such as property, supplies, and accounts receivable. These are offset equally by accounts payable to other companies and other commitments the company has agreed to (liabilities).
As a rule, the amount of assets a company owns has to equal its liabilities plus its equity (A = L + E) to ensure everything is accounted for. This helps create a complete picture of where the resources of a company sit and the potential strength of it’s future. It is worth looking at balance sheet examples across different industries to see how companies approach things differently. A retail store or manufacturer might carry lots of inventory whereas a software or technology company will very little tangible assets. Understanding how each balance sheet would likely look in each industry is a very important skill to really understanding the health of the business.
The table below provides a basic balance sheet example and the key elements it tracks.
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