This shows a summary of everything that a business owns (assets) and what it owes (liabilities) in order to calculate the net worth of the business at a set point in time.
The components are: (Part 1)
Items owned by the business that it will keep for more than one year e.g. premises
Items owned by the business that are to be sold or used within one year e.g. stock
Items that a business owes that are to be paid back within one year e.g. an overdraft
Part 1 of the balance sheet shows where the money is tied up in the business in assets, and where it is owned in liabilities.…