Balance Sheet in Accounting
- Balance Sheet
- Balance Sheet
- Accounting Equation
- Assets vs Liabilities
- Trial Balance vs Balance Sheet
- Balance Sheet vs Consolidated Balance Sheet
- Bank vs Company Balance Sheet
- Commitments and Contingencies
- Management Discussion & Analysis
- Revenue Reserve vs Capital Reserve
- Revenue Reserve
- Capital Reserve
- Capital Receipts vs Revenue Receipts
- Capital Lease vs Operating Lease
- Debt vs Equity Financing
- Internal vs External Financing
- Held to Maturity Securities
- Available For Sale Securities
What is Balance Sheet in Accounting?
Balance sheet in accounting is a financial snapshot of the company at a given point in time. It is one of the most important financial statements that is used for financial analysis and forecasting. Balance Sheet in accounting provides details of assets (current assets and long-term assets), liabilities (current liabilities and long-term liabilities) and shareholders equity (common stock, preferred stock and retained earnings) in detail.
In this section on Balance Sheet in accounting, we discuss the following topics in detail
- We discuss the Balance Sheet Accounting Equation Assets = Liabilities + Equities in detail along with its importance
- Key differences between assets and liabilities
- Differences between Trial balance and Balance Sheet
- Balance Sheet impact when financing is done through equity or debt
- What is the difference between the accounting for balance sheet and consolidated balance sheet
- Annual reports contain management discussion and analysis and what all additional details does it provide regarding the balance sheet.
- We also discuss the impact of Commitment and Contingencies which do not usually come on the balance sheet in accounting.
- Differences between capital reserve and revenue reserve
- Differences between capital receipt and revenue receipt
- Types of securities found on the balance sheet - held to maturity, available for sale and trading securities.
Balance Sheet in Accounting
Balance sheet is one of the most important financial statements and is useful for doing accounting analysis and modeling.
Accounting Equation is based on the double-entry bookkeeping system.
Assets vs Liabilities
Assets are something that provides future benefits to the business, whereas Liabilities are obligations to business.
Trial Balance vs Balance Sheet in Accounting
Trial balance is created to record all the balances of ledger account, whereas balance sheet is created to see whether the assets equal liabilities plus equity.
Balance Sheet vs Consolidated Balance Sheet
Balance Sheet is an important financial statement of assets, liabilities, and capital for a particular period, whereas Consolidated Balance Sheet summarizes the financial affairs of parent & subsidiary company.
Bank vs Company Balance Sheet in Accounting
Bank’s balance sheet is prepared as per the mandate by the Regulatory Authorities, whereas Company’s balance sheet is prepared as per the regulation of International Accounting Standards Board.
Commitments and Contingencies
Commitment is an obligation of a company to external entities that often arises in connection with the legal contracts executed by the company, whereas Contigencies is the implied obligation that is expected to take place depending on the outcome of the future event.
Management Discussion & Analysis
The annual report of any listed company (as listed above – Colgate) contains a separate section by the name of ‘Management Discussion and Analysis’ (MD&A).
Revenue Reserve vs Capital Reserve
Revenue reserve is created from the net profit companies make out of their own operations, whereas capital reserve is created out of capital profits.
Revenue reserve is created from the net profit generated from the company’s core operations.
Capital reserve is an account on the balance sheet to prepare the company for any unforeseen events.
Capital Receipts vs Revenue Receipts
Capital Receipts are receipts that don’t affect the profit or loss of business, whereas Revenue Receipts are receipts that affect the profit or loss of business.
Capital Lease vs Operating Lease
Capital lease is a lease that transfers substantially all the risks and rewards incidental to ownership of an asset, whereas Operating lease is stated as a lease agreement which does not involve the transfer of substantial risk and rewards of ownership of the asset.
Debt vs Equity Financing
Debt financing mean borrowing money without giving away your ownership rights, whereas equity financing is a process of raising funds by selling the stocks of the company to the financer.
Internal vs External Financing
Internal Financing is generated within the business, whereas External Financing is sourced from outside of business.