A financial statement that summarizes the company’s general financial condition into assets, liabilities and equity is known as balance sheet. Ordinarily the sum of liabilities and equity must be equal to the company’s total assets. This is in line with the accounting equation, which is assets equals to Liabilities plus Equity.
In business evaluation, the balance sheet is one the major three important financial statements. The other financial statements are income statement and statement of cash flow. The balance sheet is also seen as snapshot that represents the overall condition of a company finances at a particular moment.
Analysts calculate financial ratio with the use of balance sheet and other financial statement.
Balance sheet is very detailed since the amount involve are recorded specifically into each appropriate accounts and will assist the user to make a better decision when necessary.
On the asset section on balance sheet, accounts are presented in order of liquidity which is from bottom to the top, which implies how easily they can be converted into cash.
A liabilities are the money that company owes outside parties.
From the question presented, there should be a balance sheet category but not stated. Though this type of question is very common and the most likely balance sheet category and where each would typically appear is as follow
- Trademarks -- Intangible assets
- Account Receivable -- Current assets
- Land not currently used in operation -- long-term investments
- Notes payable (due in three years) -- long term liabilities
- Cash -- Current assets
- Wages payable -- Current Liabilities
- Store equipment -- Plant assets
- Accounts payable -- Current liabilities
KEYWORDS:
- balance sheet category
- liabilities and equity
- payable current liabilities
- financial statement
