BALANCE SHEET

Balance Sheet provides an overview of the company’s

financial strength at any point of time. Balance sheet is
divided into two parts:
Assets
Liabilities and share holder’s equity
Assets are all those which the business has acquired by the
purchase or by the contribution of owner. Assets include
land, buildings, vehicles, inventory, cash, machines,
computers, patents etc.
Liabilities are those items which business has to repay
after certain time duration. The items in liabilities are
ordered in the manner which they are likely to be paid.
The liabilities include short- and long-term loans, bills for
utilities, rent, employee expenses, bonds, taxes and many
other items.
Share Holders’ equity
= total assets- total liabilities
HORIZONTAL BALANCE SHEET
 2007

Current assets

cash 0.00
accounts receivable 132613
prepaid 4388
inventory 19908
total current assets 156909
Capital Assets
consumer equipment (net) 77952
control panels (net) 1953
computers (net) 1680
vehicles (net) 11363
total capital assets 92948
total assets 249857
liabilities and shareholder's equity
current liabilities
operating line of credit 34327
accounts payable 113250
accrued liabilities & other current payables 5575
total current liabilities 153152
long-term liabilities
sodrox term loan 88000
shareholder loan 45000
personal loan 42240
total long term liabilities 175240
total liabilities 328392
shareholder equity
capital stock 120000
retained earnings 198535
total shareholders' equity 78535
total liabilities & shareholders' equity 249857
Balance Sheet determines two things for a company:
Liquidity
Capital Structure
Liquidity analysis determines that whether the company
has sufficient cash resources to meet the short term
obligations. To determine this, financial ratios are
calculated by the use of entries in the balance sheet.
Current ratio and acid test ratio are used to determine the
liquidity.
Capital structure of the company determines the overall
ways in which company finances its operations. For this
the debt to equity ratio of a company is calculated.
Importance of Balance Sheet for Investors:
Balance sheet helps the investors to analyze:
How much cash the company has in hand.
It helps the investor to identify the most valuable assets
that company holds.
It also helps to determine how much money does
company owes.
Balance sheet helps creditors :
A company's creditors will often be interested in how
much that company has in current assets, since these
assets can be easily liquidated in case the company goes
bankrupt. In addition, current assets are important to most
companies as a source of funds for day-to-day operations.