Balance sheet (statement of financial position) shows the
ending balances of assets, liabilities, and equity at the end of the
accounting period
Mechanics Assets always equal liabilities plus equity, (which forms
the accounting equation)
ASSETS
Current assets To be used within one year of the balance sheet date
or longer, if the operating cycle is greater
Current assets Cash and equivalents, accounts receivable, inventory,
prepaid expenses to be used within a year
Long-term assets Expected benefit greater than one year
Examples: property, plant, equipment, intangible assets (copyrights,
trademarks, goodwill)
Accounts receivable (AR) Cash due from customers who have
purchased goods or received services not yet paid for
Inventory Goods for sale or manufacture, valued under GAAP at
lower of cost or market
Prepaid expense Expenses paid in advance, considered an asset until
used (such as a two year insurance policy)
Accumulated depreciation | amortization The sum of all prior
depreciation | amortization (contra asset) increases with a credit and
offsets the value of depreciable assets reported at cost
LIABILITIES
Current liabilities Obligations due in one year or less
Long-term liabilities Debts owed to creditors, due in more than one
year from the balance sheet date
Accounts payable (AP) Money owed to creditors and vendors
Notes payable Debts owed to banks or other creditors based on
written agreements
Accrued expenses Expenses incurred before the end of the
accounting period, but not yet paid for
Deferred revenue Cash received in advance, but not yet
earned
Long-term bonds payable Money borrowed to finance company
operations, due in more than one year
SHAREHOLDERS’ EQUITY
Common stock Sold to investors for ownership of a
corporation
Preferred stock Investors receive dividends before common
stockholders and usually do not have voting rights
Additional paid-in capital Investment received by corporation,
in excess of par value per share (APIC = Issuance price - Par
value)
Par (stated) value Per share amount on stock certificates, also
referred to as legal capital (no relation to market value)
Retained earnings Sum of all previous profit and losses, less
dividends
Treasury stock Stock repurchased by company
Dividends Corporate profits paid to shareholders from retained
earnings (not an expense)
