Balance sheets and income statements

Balance sheets

This accounting document looks at the question "how rich are you". It finds out what they own and what they owe. They show the wealth or indebtedness of a business. Information which is vital for stakeholders.

the balance sheet shows how it has obtianed its finances - its liabilities, it also shows the assets purchased with these funds. The BS is of vital importance for banks when deciding if they want to invest into the business or lend it money. 

The composition of the balance sheet 

It is a "snapshot" showing the position of the business at any time. Its shows what the business owns and owes on one day. 

The foundations of the balance sheet consist of the firms capital, this can come from shareholders banks and retained profit. The top section shows the types of assets bought. 

Types of asset 

Long term asset (non-current) such as 

• land and buildings: property owned by the business
• Plant/machinery/equipment
• vehicles, all types
• patents/copyrights

Short term assests (Current)

• Inventories
• Receivables
• Cash

Assesing financial performance using a balance sheet

Financial performance really…