Sample Balance Sheet Essay

2794 Words Jun 20th, 2011 12 Pages
Most accounting balance sheets classify a company's assets and liabilities into distinctive groupings such as Current Assets; Property, Plant, and Equipment; Current Liabilities; etc. These classifications make the balance sheet more useful. The following balance sheet example is a classified balance sheet.

Sample Balance Sheet:

Example Company
Balance Sheet
December 31, 2010 ASSETS | | | LIABILITIES | Current Assets | | | Current Liabilities | | | Cash | $ 2,100 | | | Notes Payable | $ 5,000 | | Petty Cash | 100 | | | Accounts Payable | 35,900 | | Temporary Investments | 10,000 | | | Wages Payable | 8,500 | | Accounts Receivable - net | 40,500 | | | Interest Payable |
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Long-term liabilities such as Notes Payable (not due within one year) or Bonds Payable (not maturing within one year) will often have current values that differ from the amounts reported on the balance sheet.

Stockholders' equity is the book value of the company. It is the difference between the reported amount of assets and the reported amount of liabilities. For the reasons mentioned above, the reported amount of stockholders' equity will therefore be different from the current or market value of the company.

By definition the current assets and current liabilities are "turning over" at least once per year. As a result, the reported amounts are likely to be similar to their current value. The long-term assets and long-term liabilities are not "turning over" often. Therefore, the amounts reported for long-term assets and long-term liabilities will likely be different from the current value of those items

One technique in financial statement analysis is known as vertical analysis. Vertical analysis results in common-size financial statements. A common-size balance sheet is a balance sheet where every dollar amount has been restated to be a percentage of total assets. We will illustrate this by taking Example Company's balance sheet (shown above) and divide each item by the total asset amount $770,000. The result is

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