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Introduction to Balance Sheet Print E-mail
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Written by Sunil Tinani   
Sunday, 25 May 2008
Page 2 of 3

Assets

The assets side of a Balance Sheet typically contains the following data:

  1. Fixed or long-term assets of the company: These are assets in which the company has invested in for the long run, and the purpose of such assets is to ensure the long-term functioning of the business. These assets are valued after depreciation and comprise the following: (i) land, (ii) factory building, (iii) plant and machinery, (iv) vehicles, (v) intangible assets (i.e., assets that have no physical form but give a business that competitive edge; e.g., patents, copyrights and rights over an asset such as an oil exploration block) and (vi) long-term investments (e.g., investment in other companies' equity, investment in government bonds, term fixed deposits, etc.).

  2. Current assets or short-term assets of the company: Current assets comprise of inventories (raw material, semi-finished and finished goods), accounts receivable (monies receivable from customers), investments held for trading, and any other short-term assets.

  3. Cash: This is made up of cash in hand and credit balances in bank accounts.

  4. Prepaid expenses: These are expenses incurred by the company that do not pertain to the financial year that the Balance Sheet represents, such as tax for the following year paid in advance, rent paid in advance, etc.

Liabilities

Liabilities are made up of:

  1. Accounts payable, which are represented by money due to suppliers of raw materials, salaries/bonuses payable, outstanding utility (phone, power, Internet, etc.) bills, and any other amount due to a supplier of any other goods or service.

  2. Long-term financial liabilities comprise of loans taken from financial institutions, money raised from issuing corporate bonds, fixed deposits accepted, mortgages payable, etc.

  3. Provisions for current tax payable, court rulings, deferred tax provisions and provisions for contingencies that are now payable.


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