Balance Sheet Items

Edited byAshish Kumar Srivastav
Reviewed byDheeraj Vaidya, CFA, FRM

Balance Sheet Items Classifications

The items which are generally present in all the Balance sheet includes:

  • Assets like cash, inventory, accounts receivable, investments, prepaid expenses, and fixed assets.
  • Liabilities like long-term debt, short-term debt, Accounts payable, Allowance for the Doubtful Accounts, accrued and liabilities taxes payable.
  • The Shareholders’ equity-like Share capital, additional paid-in capital, and retained earnings.
Balance-Sheet-Items

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Source: Balance Sheet Items (wallstreetmojo.com)

The most common balance Sheet items are listed below –

  1. Cash and EquivalentsCash And EquivalentsCash and Cash Equivalents are assets that are short-term and highly liquid investments that can be readily converted into cash and have a low risk of price fluctuation.  Cash and paper money, US Treasury bills, undeposited receipts, and Money Market funds are its examples. They are normally found as a line item on the top of the balance sheet asset. read more (Current Assets)
  2. Marketable SecuritiesMarketable SecuritiesMarketable securities are liquid assets that can be converted into cash quickly and are classified as current assets on a company's balance sheet. Commercial Paper, Treasury notes, and other money market instruments are included in it.read more (Current Assets)
  3. Account ReceivablesAccount ReceivablesAccounts receivables is the money owed to a business by clients for which the business has given services or delivered a product but has not yet collected payment. They are categorized as current assets on the balance sheet as the payments expected within a year. read more (Current Assets)
  4. Inventories (Current Assets)
  5. Prepaid ExpensePrepaid ExpensePrepaid expenses refer to advance payments made by a firm whose benefits are acquired in the future. Payment for the goods is made in the current accounting period, but the delivery is received in the upcoming accounting period.read more (Current Assets)
  6. Property, Plant, and Equipment (Fixed Assets)
  7. Intangible AssetsIntangible AssetsIntangible Assets are the identifiable assets which do not have a physical existence, i.e., you can't touch them, like goodwill, patents, copyrights, & franchise etc. They are considered as long-term or long-living assets as the Company utilizes them for over a year. read more (Fixed Assets)
  8. Account PayableAccount PayableAccounts payable is the amount due by a business to its suppliers or vendors for the purchase of products or services. It is categorized as current liabilities on the balance sheet and must be satisfied within an accounting period.read more (Current Liabilities)
  9. Unearned RevenueUnearned RevenueUnearned revenue is the advance payment received by the firm for goods or services that have yet to be delivered. In other words, it comprises the amount received for the goods delivery that will take place at a future date.read more (Current Liabilities)
  10. Short Term Debt (Current Liabilities)
  11. Current Portion of Long-term DebtCurrent Portion Of Long-term DebtCurrent Portion of Long-Term Debt (CPLTD) is payable within the next year from the date of the balance sheet, and are separated from the long-term debt as they are to be paid within next year using the company’s cash flows or by utilizing its current assets.read more (Current Liabilities)
  12. Other Accrued ExpensesAccrued ExpensesAn accrued expense is the expenses which is incurred by the company over one accounting period but not paid in the same accounting period. In the books of accounts it is recorded in a way that the expense account is debited and the accrued expense account is credited.read more and Liabilities (Current Liabilities)
  13. Long term DebtLong Term DebtLong-term debt is the debt taken by the company that gets due or is payable after one year on the date of the balance sheet. It is recorded on the liabilities side of the company's balance sheet as the non-current liability.read more (Long Term Liabilities)
  14. Paid-in CapitalPaid-in CapitalPaid in Capital is the capital amount that a Company receives from investors in exchange for the stock sold in the primary market, including common or preferred stock. This considers the sale of stock that an issuer directly sells to the investor & not the sale of stock on the secondary market between investors. read more (Shareholders Equity)
  15. Retained EarningsRetained EarningsRetained Earnings are defined as the cumulative earnings earned by the company till the date after adjusting for the distribution of the dividend or the other distributions to the investors of the company. It is shown as the part of owner’s equity in the liability side of the balance sheet of the company.read more (Shareholders Equity)

The Balance Sheet is based on fundamental accounting EquationsAccounting EquationsAccounting Equation is the primary accounting principle stating that a business's total assets are equivalent to the sum of its liabilities & owner’s capital. This is also known as the Balance Sheet Equation & it forms the basis of the double-entry accounting system. read more which are below-

fundamental accounting Equations

Key Takeaways

  • Balance sheet items represent specific categories of assets, liabilities, and shareholders’ equity reported on a company’s balance sheet.
  • Common balance sheet items include cash, accounts receivable, inventory, property, plant, equipment (PP&E), accounts payable, long-term debt, common stock, and retained earnings.
  • Balance sheet items provide valuable information about a company’s financial position, liquidity, solvency, and capital structure.
  • Understanding and analyzing balance sheet items helps stakeholders evaluate the company’s assets, liabilities, and equity and make informed decisions about its financial health.

Top 15 Balance Sheet Items List

In the Balance SheetIn Balance SheetA balance sheet is one of the financial statements of a company that presents the shareholders' equity, liabilities, and assets of the company at a specific point in time. It is based on the accounting equation that states that the sum of the total liabilities and the owner's capital equals the total assets of the company.read more, normally, Assets are shown on the left-hand side with decreasing order of their liquidity. That means Current Assets will come on the top, and then fixed Assets will be shown. Liabilities and equity are shown on the right-hand side. Liabilities are shown before equity and are in decreasing order of liquidityOrder Of LiquidityThe presentation of various assets in the balance sheet with the time it takes for each to be converted into cash is known as the order of liquidity. Cash is considered a most liquid asset, followed by cash equivalents, marketable securities, account receivables, inventories, non-current investments, loans and advances, fixed assets.read more. Shareholder’s equity is shown below liabilities. As shown in IBM’s Balance Sheet,

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Below are the main components of the Balance Sheet:-

Current Assets

Current Assets

Assets are cash resources or can be converted to cash by selling. Companies can acquire assets using cash; they are known as “Use of Cash.” Current assets are expected to be realized in cash or sold to customers in a given operating cycleOperating CycleThe operating cycle of a company, also known as the cash cycle, is an activity ratio that measures the average time required to convert the company's inventories into cash.read more or one year. In a typical balance sheet, Current Assets are put before Fixed Assets. Below are the major items in Current Assets-

#1 – Cash and Equivalents

Cash is the funds that are readily available for disbursements. Cash and equivalents are the most liquid assetLiquid AssetLiquid Assets are the business assets that can be converted into cash within a short period, such as cash, marketable securities, and money market instruments. They are recorded on the asset side of the company's balance sheet.read more. Cash equivalentsCash EquivalentsCash equivalents are highly liquid investments with a maturity period of three months or less that are available with no restrictions to be used for immediate need or use. These are short-term investments that are easy to sell in the public market..read more are assets with a maturity period of fewer than 90 days.

#2 – Marketable Securities

Marketable Securities are assets that can be converted into cash in one year and are readily available. In addition, marketable securities provide interest amounts to the firm.

#3 – Account Receivables

The amount which is owed to the entity by its customers. If the amount is owed to parties other than customers, it is known as Notes receivablesNotes ReceivablesNotes Receivable is a written promise that gives the entitlement to the lender or holder of notes to receive the principal amount along with the specified interest rate from the borrower at the future date.read more.

#4 – Inventories

Inventories are assets that a business owner will sell in the future. The company is expected to sell its inventory shortly. That’s why it is put under Current Assets.

#5 – Prepaid Expense

The prepaid expense consists of the expense that the company has already paid, but until now, services for that payment have not been received. The company is expected to get the service shortly. Examples of prepaid expenses can be advancedExamples Of Prepaid Expenses Can Be AdvancedPrepaid expense examples will provide an idea of the various payments made by the company in advance for those goods or services which will be procured in future. Some of these include prepaid rent, advance salary and prepaid insurance.read more insurance policy payments or advance salaries to the company’s workers.

In IBM, below are the items under Current Assets:

IBM Balance sheet

Fixed Assets

Non Current Assets

Assets such as Property, Plant, and Equipment come under this category. These assets have a life of more than one year. Therefore, they are acquired to generate cash flowGenerate Cash FlowCash Flow is the amount of cash or cash equivalent generated & consumed by a Company over a given period. It proves to be a prerequisite for analyzing the business’s strength, profitability, & scope for betterment. read more for many years. Since the cash flow from these assets comes in future years, they are capitalized for their useful life instead of making expenses at the time of purchase.

Fixed AssetsFixed AssetsFixed assets are assets that are held for the long term and are not expected to be converted into cash in a short period of time. Plant and machinery, land and buildings, furniture, computers, copyright, and vehicles are all examples.read more can be broadly classified into the following:

#6 – Property, Plant, and Equipment

These are the assets that are tangible and relatively long-lived. It includes Buildings, land, hardware, Computers, etc.

#7 – Intangible Assets

Intangible Assets are assets that cannot be seen or touched physically. An Example of the intangible assetExample Of The Intangible AssetSome of the most common intangible assets are logos, self-developed software, customer data, franchise agreements, Newspaper Mastheads, license, royalty, Marketing Rights, Import Quotas, Servicing Rights etc.read more is the firm’s intellectual property, such as a patent or software. The cost of individual assets is also amortized over the years.

Current Liabilities

Current Liabilities are an obligation for the firm, which must be paid in a given accounting periodAccounting PeriodAccounting Period refers to the period in which all financial transactions are recorded and financial statements are prepared. This might be quarterly, semi-annually, or annually, depending on the period for which you want to create the financial statements to be presented to investors so that they can track and compare the company's overall performance.read more or one year.

#8 – Account Payable

Accounts Payable is an operating liability that the company needs to pay its supplier for the goods and services received. 

Current Liabilities

#9 – Unearned Revenue

If the revenue has been generated and still services/goods need to be delivered, it is accounted for under unearned revenue.

#10 – Short Term Debt

Debt whose maturity is less than one year comes under this category.

#11 – Current Portion of Long-term Debt

When companies take long-term loans such as bonds, they will have to pay interest or coupon payments for that loan each year. That amount that needs to be paid in a year will come under Current Liabilities.

#12 – Other Accrued Expenses and Liabilities

It could include money owed to employees etc.

Long term Liabilities

Non Current Liabilities List

Long term liabilitiesLong Term LiabilitiesLong Term Liabilities, also known as Non-Current Liabilities, refer to a Company’s financial obligations that are due for over a year (from its operating cycle or the Balance Sheet Date). read more are the firm’s liabilities and are not expected to pay within one year.

#13 – Long Term Debt

Long-term liabilities include Long term debt and bonds issued by companies. Long-term debt can be taken from many sources such as banks, and will have a different interest and repayment structure. Bonds are the longer-term debt such as 30 years, in which the firm issues the bond to lenders and then makes coupon payment each period as stated in the bond structure. At the time of maturity, lenders get the last coupon payment and a face amount of bond.

Shareholder’s Equity

Balance Sheet - Shareholder's Equity

Shareholder’s Equity is the difference between the Firm’s Assets and liabilities. It is a residual valueResidual ValueResidual value is the estimated scrap value of an asset at the end of its lease or useful life, also known as the salvage value. It represents the amount of value the owner will obtain or expect to get eventually when the asset is disposed.read more to its shareholders. Shareholders’ equity mainly consists of Share Capital and Retained Earnings.

#14 – Paid-in Capital

Paid-in capital is the value of shares that the company has made by issuing shares to its shareholders. Shares can be of 2 types Common StockCommon StockCommon stocks are the number of shares of a company and are found in the balance sheet. It is calculated by subtracting retained earnings from total equity.read more and Preferred StockPreferred StockA preferred share is a share that enjoys priority in receiving dividends compared to common stock. The dividend rate can be fixed or floating depending upon the terms of the issue. Also, preferred stockholders generally do not enjoy voting rights. However, their claims are discharged before the shares of common stockholders at the time of liquidation.read more. Preferred Stockholders have preferential rights to assets for the company before common shareholders. Stocks have a very negligible par value. Their additional paid-in capitalAdditional Paid-in CapitalAdditional paid-in capital or capital surplus is the company's excess amount received over and above the par value of shares from the investors during an IPO. It is the profit a company gets when it issues the stock for the first time in the open market.read more is the difference between the value the company sells to shareholders and par valuePar ValuePar value is the minimum value of a security set and stated in the corporate charter or its certificate by the issuer when issued for the first time.read more.

#15 – Retained Earnings

Retained Earnings are the amount that comes from the company’s internal profit. The firm has two options for net income either to pay the dividendDividendDividends refer to the portion of business earnings paid to the shareholders as gratitude for investing in the company’s equity.read more or retain it to invest in some projects. Retained Earnings are the difference between Net Income and dividends paid.

Retained Earnings formula

Final Thoughts

As an investor, one should understand the meaning of all the balance sheet items, and it is interconnected with the Income Statement and Cash Flow StatementCash Flow StatementA Statement of Cash Flow is an accounting document that tracks the incoming and outgoing cash and cash equivalents from a business.read more. Balance Sheets are also most prone to accounting adjustment (or we can say that manipulation), so we should also read the footnotes carefully in company reports to find out how the numbers are put in the accounts.

Frequently Asked Questions (FAQs)

What are current assets, and why are they important?

Current assets are balance sheet items expected to be converted into cash within one year or the business’s operating cycle. They include cash, accounts receivable, inventory, and short-term investments. Current assets provide insight into a company’s liquidity and ability to meet short-term obligations.

What are intangible assets, and why are they significant?

Intangible assets are non-physical assets that lack a physical presence but hold value for a company. Examples include patents, trademarks, copyrights, brand names, and goodwill. Intangible assets are important because they can contribute to a company’s competitive advantage and overall value.

Why is long-term debt a significant balance sheet item?

Long-term debt represents borrowed funds that are due beyond one year. It includes bonds, mortgages, and other long-term loans. Long-term debt is significant because it reflects the company’s obligations over an extended period and indicates its ability to manage and repay long-term financial commitments.

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