APPLICATION OF FINANCIAL STATEMENT
A balance sheet will give me the opportunity to take a closer look at my personal assets and liabilities like a snap shot; evaluate whether I should loan money to family and friends and view my net worth while I still living and when I die.
When I prepare a balance sheet listing my assets, I will list the following:
~ Cash I have on hand
~ How many different bank accounts I currently have opened
~ How much to I owe to debtors
~ How many retirement accounts and with whom
~My investments (ex. Rental properties, stocks and bonds)
~Net worth of my life insurances policy(s)
~How many vehicles I own and their net worth
My liabilities ...view middle of the document...
By comparing past balance sheets with the present balance sheet, the growth or decline of assets, liabilities and net worth can be determined (Klinefelter, 2012).
A business manager will benefit from the balance statement because it is the only financial statement that applies to a single point of a business’ calendar year and how easy the layout is to read and comprehend. A standard company balance sheet has three parts: assets, liabilities and ownership equity. The main categories of assets are usually listed first and typically in order of liquidity. Assets are followed by the liabilities. The difference between the assets and the liabilities is known as equity or net assets or the net worth or capital of the company and according to the accounting equation, net worth must equal assets minus liabilities.
For a business manager, let us take a more in-depth look at the components listed on the balance sheet:
~Assets are anything that the business own. To expand on this more, this means all that the business has acquired to purchase or by their own contribution. (Ex. Company truck)
~Liabilities are claims against the assets excluding the owners’ contributions.
~Equity is what is equal to the total assets minus the total liabilities. Balance sheets are also great...