Balance Sheet Example for Financial Modeling of the Company
A balance sheet represents the financial state of a business by providing a view of the total assets and how they are funded. As one of basic financial statements, balance sheet becomes the key to accounting and financial establishment. Balance sheet always lies on the basic formula that assets are the sum up of liability and equity, so how does it help to support a company’s finance?
Content of Balance Sheet Example
There will always be a little difference among balance sheets in different business, company, or industries. In common, a balance sheet example will contain:
Current assets
- Cash equivalents
They are all company’s cash and assets that written on the first line of balance sheet including short-term assets (less than three months) or short noticed liquidated assets like marketable securities. The explanation of equivalent type will be added in the balance sheet’s footnote.
- Accounts receivable
All income or profit and any grants for accounts that generate debts decreases and increases by the same cash amount included in this account.
- Inventory
In balance sheet example, it covers the amount of raw materials, finished goods, and goods that are still in progress. This account is commonly used to report goods’ sale.
Long-term assets
- PP&E (Plan, Property, & Equipment)
All fixed assets listed here are depreciable except land. Some companies will categorize their fixed assets into different types of PP&E.
- Intangible assets
All inexplicit fixed assets included here might be or might not be recognizable. Recognizable assets cover formulas, patents, and licenses, whereas the unrecognizable one includes goodwill and brand.
Current liabilities
- Accounts payable
List the amount of company’s debt for items and services purchased from the suppliers on credit here in the balance sheet example. Once the company pays off the debt, the amount of account payable will decrease along with the decrease of the cash account.
- Current debt
All the debts that must be paid within a year or within the longest operating cycle of a company. It also may include the long-term current debt that covers notes with more than one year maturity.
- Current portion of long-term debt
It seems similar with the current debt, but this one has a specification for the debts with more than one-year maturity.
Long-term liabilities
- Bonds payable
This section is the reduced amount of any payment obligations that the company has spent.
- Long-term debt
This account covers the amount of long-term debts except the current portion one). All of the interest expenses, principal repayment, and outstanding debts of the company are included here.
Equity
- Share capital
Share capital is the amount of shareholder’s invested funds in the company that usually in form of cash at the beginning of the company formation.
- Retained earnings
The company will keep the total amount of the income here.
Benefits of Using a Balance Sheet
By getting a balance sheet example, companies may compare their current assets and current liabilities. A balance sheet indicates the financial risks threating the company by comparing the debts to the equity and to the total capital. It also might be used as an evaluation tool to check the capability of a company to generate returns.
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