Online Balance Sheet Analysis Lessons
Balance sheet is one of the popular
financial statements namely income statement (also known as profit
and loss statement), cash flow statement and the balance sheet.
Balance
sheet structure into three major sessions namely Assets, Liabilities
and Capital, reserves. Assets session can be further break down to
current assets (assets that can convert into cash within one year)
and long term assets. Liabilities session consist of current
liabilities and long term liabilities. Capital and reserves session
record all the shareholders equity, paid in capital, retained
earning etc...
The
following pages provide the detail of each item listed in balance
sheet such as working capital, prepaid expenses, deferred charges
and more... Understanding each item listed in balance sheet will
prepared you to interpret and reading balance sheet correctly and
get ready for further financial ratios analysis.
The
balance sheet, from my perspective, gives the most
grief to people, including small-business owners,
bankers, and even bookkeepers.
What's
so difficult about it? Each item on the balance
sheet has its own rules (remember GAAP?) as to how it
must be valued and presented. Most items are
generally valued at historical cost - that is, the
cost at which the item was originally purchased.
However, other valuation measures exist on the
balance sheet including amortized cost, lower cost
or market, and present value of future cash flows.
