Series 65: 1.4.1.2. The Balance Sheet

1.4.1.2. The Balance Sheet

The balance sheet is a document that summarizes a company’s assets, liabilities, and shareholders’ equity. On the balance sheet, assets are what the company owns, liabilities are what the company owes, and shareholders’ equity is what’s left over, the company’s net worth. The balance sheet is different from the income statement in that it shows financial information at a particular point in time rather than over a period of time.

The balance sheet is represented by the following equation:

assets = liabilities + shareholders’ equity

This equation demonstrates that at all times a company’s assets must be equivalent in value to the combined value of the company’s liabilities and shareholders’ equity.

Balance Statement for Northwest Coffees, Inc. (in millions)
Assets
Cash and Cash Equivalents	7.0
Accounts Receivable	10.0
Inventory	3.7
Property, Plant and Equipment	15.1
Goodwill	1.2
Patents	3.2
Total Assets	40.2
Liabilities
Accounts Payable	5.0
Other Current Liabilities	2.5
Long-term Debt	12.4
Total Liabilities	19.9
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