Balance Sheet – What You Need to Know

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A balance sheet, also known as a Statement of Financial Position, is an overview of a company’s assets, liabilities, and equity at the moment in time. Unlike a P&L statement, which compares revenue and costs over a period, a balance sheet is recorded for any given day at any given time. A balance sheet is one of 3 statements companies issue to shareholders or creditors at the end of a financial period. If your company is privately owned, these statements are highly recommended. They will show you how well your company is doing and where your equity lies on the margin of negative vs. positive. This article will discuss what a balance sheet is, what it covers, and the basic formats that can be used. To avoid confusion, we will outline the basics of a balance sheet in easy-to-understand terms and examples for new business owners who may not have expertise in accounting terms. Download A Free Financial Toolkit

Balance Sheet Format

Balance sheets follow two types of formats: account form and report form. The difference between the two is the number of columns. An account form has two columns: assets on the left liabilities, and equity on the right. A report form is a single column starting with assets, then liabilities, and concludes with equity. Most business owners choose to use a more concise report form. Like most assignments, your company’s title is listed at the top, followed by “Balance Sheet” and the date. Assets are always listed first, followed by liabilities and equity, with no exception. Within these three categories, each has three subcategories. Next, we will look into each category and what the subcategories entail.


Assets are items that your company owns that have a monetary value. As stated before, Assets and Liabilities have three subcategories: current, long-term, and “other.” On your balance sheet, assets should be listed in order of liquidity (how quickly it can become cash in your hand.)

Current Assets

Current assets can be turned into cash instantly or within 30 days. Such things include:

  • Bank accounts
  • Accounts receivable (money that customers owe you)
  • Inventory

ADP. Payroll – HR – Benefits Long-Term Assets

Long-term assets can be turned into cash over a more extended period, unlike current assets, which can be turned over instantaneously or within 30 days. Long-term assets depreciate over time, so besides each long-term asset, depreciation value is subtracted. For example, you bought a car brand new for $10,000. In 2 years, the car’s value goes down to $7,000. Your depreciation is $3,000. Depreciation values are the only negative numbers you’ll find in the asset category of your balance sheet. Long-term asset examples are:

  • Equipment
  • Vehicles
  • Long-term notes receivable (if you are not getting paid by a customer within 30 days)
  • Buildings (most of the time, don’t depreciate; they go up in value over time)
  • Leasehold improvements
    • The amount a business spends to improve a space to function properly for them and their customers, as long as they are leasing the space. Leasehold improvements, also known as tenant improvements, lose value each year of the lease until they are valued at zero on the day the lease expires. You can write them off the lease term as depreciation on your taxes.

Other Assets

The “other” category is negotiable, depending on your company. These assets are notably intangible. These other assets include investments, goodwill, trademarks, and licenses.


Liabilities are what your company owes, rather than Assets, which show what you own. Liabilities come in three subcategories: current, long-term, and owner’s debt.

Current Liabilities

Current liabilities, like the previous format, are always listed first. A simple definition of current liabilities is debt or other dues that must be paid during the billing period. Examples of current liabilities are as follows: LastPass – Family or Org Password Vault

  • Accounts payable
    • Bills you need to pay
  • Accrued liabilities
    • These are expenses your company accounts for ahead of time, such as payroll, taxes, and interest.
  • Lines of Credit
    • What you owe on your credit cards.
  • Loans
    • These can be short-term loans or payments on long-term loans that are due within the next 30 days.

Long-Term Liabilities

Long-term liabilities are accounts payable that aren’t due to be paid in full within the next 12-month period. Depending on the size of your company, Long-term liabilities may be summarized in one category or expanded into subcategories. Long-term liabilities may also be referred to as long-term debt or non-current liabilities. Examples of long-term liabilities include:

  • Pension/Health care obligations
  • Long-term loans
    • Equipment loans, auto loans, etc.
    • Long-term leases that cannot be terminated
  • Bonds payable

Owner’s Debts

Sometimes, instead of taking out a traditional bank loan, owners of companies will loan their own money to the company. If this applies to your company, creditors, or others looking at your balance sheet, you want to see these types of loans separately. This is where you input the amount due to shareholders or owners of a company. Complete Controller. America’s Bookkeeping Experts About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity. CorpNet. Start A New Business Now