He balance sheet is the financial statement of a company on a certain moment. In order to reflect said state , he balance shows accounting the assets (what organization owns), the liabilities (your debts) and the difference between them (the net worth ).
The general balance, therefore, is a kind of photograph that portrays the accounting situation of the company on a certain date. Thanks to this document, the entrepreneur accesses vital information about his business, such as the availability of money and the status of his debts.
The company's assets consist of the money it has in cash and in banks, accounts receivable, raw materials, machines, vehicles, buildings and land.
In the case of assets we have to underline that these are usually classified into three clearly defined types:
Current assets. Among them are those elements that are capable of easily becoming cash. Hence, within this typology are the money that is in the bank and the one that is available in the company itself, the accounts that remain to be collected from customers, the checks that must be cashed and what are the inventoried goods (materials premiums, finished products, products in process of elaboration…).
Fixed assets. Under this denomination they include all the real estate and personal property that the company in question has and that are basic for the performance of its activity. In this way, examples of assets of this type are vehicles, furniture, land, buildings or machinery, among others. It is important to know that these assets are subject to what is known by the name of depreciation, that is, the wear and tear they suffer from use.
Other assets. This classification includes assets that do not belong to any of the two categories mentioned above. Examples of those would be the expenses that are paid in advance.
The liability, on the other hand, is made up of debts, bank obligations and taxes payable, among other issues.
In the case of liabilities these can also be classified into three categories:
Long term passives. They are those that the company must pay in the term superior to one year.
Current liabilities They are what the industry must pay in less than one year: benefits, overdrafts, credits ...
Other passives. They are those that are not included in any of the two previous classifications.
It should be noted that the balance sheet is also known as estate statement . The document usually presents different columns, which organize the values according to whether they are active or passive. The difference between these is net worth, that is, the difference between what the company has and what it owes.
Beyond that the balances are useful for the owners of the companies, their elaboration is usually in charge of specialists in accounting . The accountants are responsible for analyzing the numbers and turning them over to the balance sheet. Once the balance sheet is closed, it is presented to the entrepreneur or the relevant manager, who will make the corresponding decisions for the management of the company.
