Balance Sheet Liabilities And Stockholders Equity Balance Sheet Liabilities In Order Of Liquidity Balance Sheet Liabilities Exceed Assets Bank Balance Sheet
Most Popular This Week
If you contributed something other than cash such as real estate machinery or your interest in another business then use the rules for the valuation of assets the lessor of cost or fair market value. Retained earnings is a whole different ball game. Remember what I said back in the beginning about the formula for the balance sheet? That Assets = Liabilites + Equity? Well if you ve filled everything else out you only have retained earnings left and using a little bit of algebra and adding some detail to the preceding formula retained earnings absolutely must equal Assets - Liabilities - Contributed Capital.
Now it s fine to do the math and plug the number to get started but as you go forward your retained earnings will develop a new relationship with the income statement (also commonly called the profit and loss statement). Basically the relationship is net income + any contributions to capital - any distributions of capital (dividends) = the change in retained earnings for the period. So retained earnings becomes the bridge between the balance sheet over two consecutive time periods (usually a year). For more information on calculating retained earnings see the link to my blog below. What the CPA or Auditor Does You ve done a fantastic job getting your balance sheet set up and keeping it going but at some point you re going to show it to someone a banker a supplier a potential business partner and they are going to take one look at the work that you have so proudly and lovingly put your heart into and they will say "what the Hell is this crap?" Don t take it personally (you need their money after all) just understand that there are standard ways to present present financial statements and set rules to follow.
Most Popular This Week
This is the basis of balance sheet accounting. Another option in the disposition of an asset is that the asset is sold for cash and it is a wash within the assets. A simple example of balance sheet accounting is that a car is sold and therefore the automobile account is reduced by credit. However cash was received was an increase in another asset cash. Therefore the cash account would be debited and total assets would remain unchanged. This happens quite often with short-term investments and it is rarely noticed or noted. Sometimes it is helps to wrap your mind around balance sheet accounting to look at it from the stand point of a liability or the equity accounts. Say a liability is paid down or equity is purchased. This would be a debit to either of these accounts. There had to be an asset outlay for either of these events to happen probably and outlay of cash. This would be a credit to the asset account and the balance sheet would be balanced. Though this is a simplistic view it gets the point across. Since investments are considered assets they are treated the same way. Investments are listed in order from shortest term or most liquid to longest term or least liquid. They are also listed by the percentage of ownership owned. For example if an investor own fifty percent of a business that business is listed under assets and there is a denotation with it that says fifty percent or fifty percent owned or some other version of the same thing. This is so that there is full disclosure for any users of the financial statement. Thus investments have a huge impact on balance sheet accounting.For more information on investing in investment opportunities usually or