Dividends On Balance Sheet Dividends Payable Classified Balance Sheet Dividends Payable Balance Sheet Classification Dividend Recap Impact On Balance Sheet
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It depicts the organizations assets liabilities and owners equity. The balance sheet equation is as followed ssets = Liabilities + Owners Equity. The two sides of the equation balance out hence why the statement is called the balance sheet. Assets are the economic benefits that will be acquired and controlled by an organization as a result of past transactions. Assets are tangible; they include cash accounts receivable inventory and equipment. Assets can be broken down into current and long term. Current assets such as cash and accounts receivable are assets that are or can be transformed into cash or benefit the company within one year.
Purpose of a Balance Sheet The balance sheet boldly declares where a business stands at a given moment in time. From the balance sheet a financially sophisticated reader can learn an immense amount of valuable information about a business and its viability. That is why potential investors and lenders will almost always ask you for a copy of your financial statements including the balance sheet income statement statement of retained earnings and statement of cash flows. This is also why you as a savvy entrepreneur need to understand the information presented on them. Why It Is Important The principal reason your business s balance sheet is so important to you and to any potential investors or lenders is that it is like a photograph of your business.
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They are the positive side of your Balance Sheet but the real picture of how much gold you have in your Fort Knox is your Net Worth. So just as important to your Balance sheet is your Liabilities. The total of your Liabilities is subtracted from the total of your Assets to give you your Net Worth. You fill out your Balance Sheet and total up your Assets and Liabilities. You subtract the total of your Liabilities from your Assets. That number your Net Worth will come out to either a negative amount an amount of or near to zero or it will be substantially positive. These are the only 3 scenarios possible. • If your net worth is a minus number you are not managing your financial resources properly. Your Balance sheet is your report card and you are failing. It is that simple.