1st Bac - Basic Balance Sheet/Financial Statements
Basic Balance Sheet The last step in the accounting process is the elaboration of a report that gives information about the financial situation of a business. In accounting this report is known as balance sheet. Characteristics of the Balance Sheet A balance sheet is a report that explains, for a period of time, the financial situation of a business taking into account the investment (assets), the debt (liabilities) and the resources given by the entrepreneur (equity). Assets = Liabilities + Equity Importance of the Balance Sheet The information found on the balance sheet helps the company at the moment of identifying its strengths and weaknesses. Also, it helps to look at the progress the company has had. Process of Elaborating a Balance Sheet 1. Determine the Reporting Date and Period A balance sheet is meant to depict the total assets, liabilities, and shareholders’ equity of a company on a specific date, typically referred to as the reporting date. Often, the...