The balance sheet is an indispensable “component” in the financial reporting system of an enterprise. Are you a candidate looking for an accounting job? So can you explain specifically “What is a balance sheet?”. If you are not really sure, please refer to the article below of riclix.com.
Viewing: What is a Balance Sheet
Can you explain specifically “What is a balance sheet?”
► What is a balance sheet
?The balance sheet is a report that generally reflects the assets – capital position of the enterprise at the time of making the table. Under the influence of arising economic transactions, an entity’s assets always have movement and change in terms of structure, quantity, and source of formation… so the data shown on the balance sheet is only reflect the financial position of the enterprise at the time of the table.
The balance sheet is usually prepared at the end of the month – at the end of the quarter – at the end of the year – at the end of the year or at the end of the production and business cycle, depending on the regulations of each enterprise. Previously, the balance sheet was also known as the balance sheet of assets and capital or the balance sheet of assets…
The balance sheet is also known as the balance sheet of the business
► Contents of balance sheet
The content shown in the balance sheet reflects the balance relationship between assets and capital of the enterprise according to the formula:
Total assets (capital) = Liabilities + Equity
► Balance sheet structure
The structure of the balance sheet consists of two parts: assets + capital
– Assets: including current assets, short-term investments and fixed assets, long-term investments => total value of existing assets of the enterprise.
– Capital source: including liabilities and owners’ equity => the source of existing asset value.
Sample balance sheet
► Effect of balance sheet
– Helps managers understand the entire asset value + existing asset structure of the business, capital situation + capital structure.
– General assessment of the financial situation and results of production and business activities of the enterprise.
See also: What is a Fiscal Year – Fiscal Year Start Date
– Assessment of the situation of capital use, economic and financial prospects, changes in equity capital of the enterprise.
The figures shown in the balance sheet are used as evidence to submit to the bank for the enterprise to get a business loan, and also as a basis for persuading partners to agree to do business with the enterprise.
► How to read balance sheet
Reading the balance sheet will help you identify the size, financial autonomy, capital usage structure, etc. of the business.
Principle when reading balance sheet: Total assets = Total capital
– About property:
Total assets indicate the size of the enterprise, when this value decreases compared to the previous period, it is necessary to consider the possibility of reducing the scale of production and business. The order of assets shown in the balance sheet is ranked by ability. The ability to convert to cash decreases. Assets shown in the balance sheet show what assets the business has used capital for. For a conventional manufacturing enterprise, long-term assets must be greater than short-term assets – with a commercial enterprise, the opposite is true.
For manufacturing enterprises, total long-term assets must be greater than current assets
– Regarding capital:
Owner’s equity: initial investment capital, equity surplus, funds… Liabilities: suppliers, electricity and water costs, bank loans…
– Analysis of financial ratios
Debt ratio = Liabilities / Total capital => Indicates the level of capital autonomy of the enterprise, if this coefficient is large and the main reason comes from debt from the bank, it is a disadvantage for the business. .
See also: what is credit by
Current liquidity = Current assets / Current liabilities Quick liquidity = Total current assets – (Inventories / Current liabilities)
In addition, when reading the balance sheet, it is also necessary to pay attention to 4 important factors, namely liabilities, inventory, payables and long-term liabilities to get an overview of the “health and safety” situation. financial health” of the business.