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The income statement

The balance sheet is the financial statement showing a firm’s assetsliabilities and equity (capital) at a set point in time, usually the end of the fiscal year reported on the accompanying income statement. The total assets always equal the total combined liabilities and equity in dollar amount. This statement best demonstrates the basic accounting equation – Assets = Liabilities + Equity. The statement can be used to help show the status of a company.

Accounting standards often set out a general format that companies are expected to follow when presenting their balance sheets. International Financial Reporting Standardsnormally require that companies report current assets and liabilities separately from non-current amounts.[6][7]

Current assets are the most liquid assets of a firm, which can be realized in 12 months period. Current assets include:

Non-current assets include fixed or long-term assets and intangible assets:

  • fixed (long term) assets
  • intangible assets

Liabilities include:

  • current liabilities
    • trade accounts payable
    • dividends payable
    • employee salaries payable
    • interest (e.g. on debt) payable
  • long term liabilities
    • mortgage notes payable
    • bonds payable

Owner’s equity, sometimes referred to as net assets, is represented differently depending on the type of business ownership. Business ownership can be in the form of a sole proprietorshippartnership, or a corporation. For a corporation, the owner’s equity portion usually shows common stock, and retained earnings (earnings kept in the company). Retained earnings come from the retained earnings statement, prepared prior to the balance sheet