A balance sheet is an overview of the financial statements of a business at a specific point in time. It includes the total assets and liabilities of a business or organization. Also, it reflects the financial position of a company during the financial year. A balance sheet consists of three entities likewise assets, liabilities and ownership equity.
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It is to be noted that there is an array of balance sheet software available in the market. But we should opt for the Best Gen Balance Sheet Software with highly considered main features.
From another perspective, balance sheets can be observed as
Assets = Liability + Owner's Equity
All-in-all, the balance sheet has two important phases which are as follows:
1. Assets: In Finance language, assets are the resources of the company or an organisation, which are owned by the company. Also, in the coming future, they are expected to bring fortune to the company. There are two types of assets, which are
A. Current assets: Resources, which can easily be converted into cash within a year, are known as current assets. For instance, they could be cash in the bank, inventory, machinery, prepaid expenses, accounts receivable, stocks, etc.
B. Fixed assets or non-current assets: Resources, which can be used by the company for the long term, are considered fixed assets. They comprise property, buildings, item as equipment, etc.
2. Liability: Several financial legal obligations of a person or a company are considered liabilities. They are the outcome of previous transactions and events performed by the person or a company. For example, any loan from banks or other sources for a business purpose which has to pay in the prescribed period (short or long) is termed as a liability. Liability is also further categorized into two phases-current liability and non-current liability.
Importance of Balance Sheet
It can render the true picture of the company’s financial position and show if it is operating under debt or profit.
Details on Sections and Sub-Sections
Also if one wants to file the balance sheet, he can try the Gen balance sheet software for free download for a few active hours to check out the major facilities given by the software
From another perspective, balance sheets can be observed as
Assets = Liability + Owner's Equity
All-in-all, the balance sheet has two important phases which are as follows:
1. Assets: In Finance language, assets are the resources of the company or an organisation, which are owned by the company. Also, in the coming future, they are expected to bring fortune to the company. There are two types of assets, which are
A. Current assets: Resources, which can easily be converted into cash within a year, are known as current assets. For instance, they could be cash in the bank, inventory, machinery, prepaid expenses, accounts receivable, stocks, etc.
B. Fixed assets or non-current assets: Resources, which can be used by the company for the long term, are considered fixed assets. They comprise property, buildings, item as equipment, etc.
2. Liability: Several financial legal obligations of a person or a company are considered liabilities. They are the outcome of previous transactions and events performed by the person or a company. For example, any loan from banks or other sources for a business purpose which has to pay in the prescribed period (short or long) is termed as a liability. Liability is also further categorized into two phases-current liability and non-current liability.
Importance of Balance Sheet
Balance Sheet Analysis provides many inputs for the company’s performance. The growth of the organization is completely determined by comparing the balance sheet of different years. It also determines the creditworthiness of the company. It can describe if the company is in expansion mode or not. That is why it is needed to be furnished to the banks for disbursal of loans.
It can render the true picture of the company’s financial position and show if it is operating under debt or profit.
Current Asset is the assets of the company which can be liquidated a short period and used for covering the operating expenses of the company.
The key components of the current asset are cash, cash equivalents, accounts receivable, stock inventory, marketable securities, prepaid liabilities, and other liquid assets. Account Receivables are the money that is due to the company and due to be paid by the customer. Stock Inventory is the stored products that can be converted into sales for the generation of revenue.
The current ratio measures the company’s ability to pay short-term and long-term obligations and takes into consideration the total current asset of the company relative to the current liability. The quick ratio is the ability to measure the ability to pay short-term obligations with its liquid asset. The cash ratio defines the company’s ability to pay off its short-term liabilities.
The current liabilities are the short-term financial obligations of the company that are due within one year or a normal operating cycle of the company. An operating cycle is the cash conversion cycle of the company. It is the time it takes a company to purchase inventory and convert it into cash. Account payables form an important part of the current liability of the company. This along with short-term debt, dividends payable, deferred revenue, taxes owed, etc are the key components of current liability.
Also if one wants to file the balance sheet, he can try the Gen balance sheet software for free download for a few active hours to check out the major facilities given by the software
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