Understanding Accounting Values on the Balance Sheet - dummies

Understanding Accounting Values on the Balance Sheet

Part of Understanding Business Accounting For Dummies Cheat Sheet

Your balance sheet is one of three primary financial statements in the running of a business. It gives an overview of the business’s total assets and liabilities at a particular date, and is an important statement of your financial affairs. So understanding what it means it crucial. This list breaks down each of the values you’re likely to encounter:

  • Cash: Amounts of money on hand in coin and currency; money on deposit in bank accounts

  • Debtors: Amounts not yet collected from credit sales to customers

  • Stock: Amounts of purchase costs or production costs for products that haven’t sold yet

  • Fixed assets (or Property, Plant, and Equipment): Amounts of costs invested in long-life, tangible, productive operating assets

  • Creditors and accrued liabilities: Amounts for the costs of unpaid expenses

  • Overdrafts and loans: Amounts borrowed on interest-bearing liabilities

  • Capital stock: Amounts of capital invested in the business by owners (shareholders). This can be either by way of the initial capital introduced by them or through profits left in the business after trading gets under way

  • Retained earnings (or reserves): Amounts remaining in the owners’ equity account