An asset is a resource a company owns and expects to receive future benefit from.
There are five main categories of assets: Current assets are cash and any other assets that a company plans to either turn into cash or consume within one year or in the operating cycle of the asset, whichever is longer.
The "bottom line" of a balance sheet must always balance (i.e. The individual elements of a balance sheet change from day to day and reflect the activities of the company.
Analyzing how the balance sheet changes over time will reveal important information about the company's business trends.
The balance sheet is made up of three different sections: assets, liabilities, and stockholders equity.
Each of these sections is further divided down into subsections.
Follow along as Find Law helps you discover how you can: Liabilities and Net Worth Liabilities and net worth on the balance sheet represent the company's sources of funds.
Liabilities and net worth are composed of creditors and investors who have provided cash or its equivalent to the company in the past.
They tell the story of how successfully or unsuccessfully a company has performed for any given period.
For example, building costs are allocated on the basis of square footage occupied by each unit.
APPROVED BUDGET - The Approved Budget represents the Board approved financial plan for a given year.
The net worth reflects the amount of ownership of the business by the owners.
The formula for computing net worth is Assets - Liabilities = Net Worth Likewise, the following formula helps explain the interaction of the elements of the statement.