![]() How do you know if a balance sheet is correct?.Here’s a handy visualization by Investopedia: Frequently Asked Questions At its core, it’s actually pretty simple: assets on one side, liabilities + owner’s equity on the other side, balancing out. Here you have it: a summary of all the standard balance sheet elements. Retained Earnings - These are net earnings reinvested back into the business instead of paying out as dividends.It can include shareholder’s investments. Owner’s Investment - This is your capital contribution to the company.It’s the amounts that are left over after the liabilities are subtracted from the assets. They show the business’s capital structure and its debt-to-equity ratio. This section includes obligations that are not due within your business’s operating cycle or in the next year. Current Portion of Long-term Debt - Add any loan principal that falls due within the year.Unearned Revenue - This is money you have received but are yet to deliver the goods or services.Accrued Salaries and Wages - Salaries that have been earned by your employees but not paid.Income Tax Payable - This is tax liability due to the government within the year.Short-term Loans - Are loans you take to support the business’s working capital needs and fall due within a year. ![]() Account Payables - These refer to the amounts you owe to suppliers.They are amounts that should be paid to creditors within a year using the current assets available. Current liabilities include: Record an overpayment under “other assets”, and an underpayment under “long-term liabilities”. deferred income tax (this results from differences in income recognition between your business’s accounting methods and tax laws). Intangible Assets - These are assets that are not physical in nature, such as trademarks, patents, and intellectual property.Property Plant and Equipment (PPE) with the Depreciation Offset - They include machinery and equipment, real estate, fixtures and fittings, and furniture used to produce goods and services.Long-Term Investments - These are investments that you will hold for over a year, such as bonds and notes.They show the business’s ability to fund future needs. Long-term assets may include: Short-term Investments - These are safe assets that are easy to convert to cash, such as debt securities.įixed assets cannot bring in cash easily and are not disposed of within the accounting year.Prepaid Expenses - These are costs that you have paid but not used, or simply, expenses paid in advance. ![]()
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