Most accounting balance sheets classify a company's assets and liabilities into distinctive groupings such as Current Assets; Property, Plant, and Equipment; Current Liabilities; etc. These classifications make the balance sheet more useful. The following balance sheet example is a classified balance sheet.
Sample Balance Sheet:
December 31, 2010
ASSETS| | | LIABILITIES|
Current Assets| | | Current Liabilities| |
| Cash| $ 2,100 | | | Notes Payable| $ 5,000 |
| Petty Cash| 100 | | | Accounts Payable| 35,900 |
| Temporary Investments| 10,000 | | | Wages Payable| 8,500 | | Accounts Receivable - net| 40,500 | | | Interest Payable| 2,900 | | Inventory| 31,000 | | | Taxes Payable| 6,100 |
| Supplies| 3,800 | | | Warranty Liability| 1,100 |
| Prepaid Insurance| 1,500 | | | Unearned Revenues| 1,500 | | | Total Current Assets| 89,000 | | | | Total Current Liabilities| 61,000 | -|
Investments| 36,000 | | Long-term Liabilities| |
| | | | | Notes Payable| 20,000 |
Property, Plant & Equipment| | | Bonds Payable| 400,000 | | Land| 5,500 | | | | Total Long-term Liabilities| 420,000 | | Land Improvements | 6,500 | | | | | |
| Buildings| 180,000 | | | | | |
| Equipment| 201,000 | | Total Liabilities| 481,000 | | Less: Accum Depreciation| (56,000)| | | |
| | Prop, Plant & Equip - net| 337,000 | | | | |
Intangible Assets| | | STOCKHOLDERS' EQUITY| |
| Goodwill| 105,000 | | | Common Stock| 110,000 |
| Trade Names| 200,000 | | | Retained Earnings| 229,000 | | | Total Intangible Assets| 305,000 | | | Less: Treasury Stock| (50,000)| | | | | | | Total Stockholders' Equity| 289,000 |
Other Assets| 3,000 | | | | |
Total Assets| $770,000 | | Total Liab. & Stockholders' Equity| $770,000 |
The notes to the sample balance sheet have been omitted.|
General Discussion of Balance Sheet
The balance sheet reports a company's assets, liabilities, and stockholders' equity as of a specific date, such as December 31, 2010, September 28, 2010, etc. General Discussion of Balance Sheet
GENERAL DISCUSSION ON BALANCE SHEET
The accountants' cost principle and the monetary unit assumption will limit the assets reported on the balance sheet. Assets will be reported
(1) only if they were acquired in a transaction, and
(2) generally at an amount that is not greater than the asset's cost at the time of the transaction.
This means that a company's creative and effective management team will not be listed as an asset. Similarly, a company's outstanding reputation, its unique product lines, and brand names developed within the company will not be reported on the balance sheet. As you may surmise, these items are often the most valuable of all the things owned by the company. (Brand names purchased from another company will be recorded in the company's accounting records at their cost.)
The accountants' matching principle will result in assets such as buildings, equipment, furnishings, fixtures, vehicles, etc. being reported at amounts less than cost. The reason is these assets are depreciated. Depreciation reduces an asset's book value each year and the amount of the reduction is reported as Depreciation Expense on the income statement.
While depreciation is reducing the book value of certain assets over their useful lives, the current value (or fair market value) of these assets may actually be increasing. (It is also possible that the current value of some assets–such as computers–may be decreasing faster than the book value.)
Current assets such as Cash, Accounts Receivable, Inventory, Supplies, Prepaid Insurance, etc. usually have current values that are close to the amounts reported on the balance sheet.
Current liabilities such as Notes Payable (due...