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Balance Sheet

Balance Sheet

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Published by: gaytarikolhe on Feb 12, 2010
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Balance sheet
From Wikipedia, the free encyclopedia
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Annual balance sheet written incuneiform script.Sumeria, clay, ca. 2040 BCE. Department of Oriental Antiquities,Louvre.Infinancial accounting, a
balance sheet
or 
statement of financial position
is a summaryof the financial balances of asole proprietorship, a business partnershipor acompany. Assets, liabilitiesand ownership equityare listed as of a specific date, such as the end of  its financial year . A balance sheet is often described as a "snapshot of a company's financial condition".
 Of the four basicfinancial statements, the balance sheet is the only statement which applies to a single point in time.A standard company balance sheet has three parts: assets, liabilities and ownershipequity. 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 andthe liabilities is known as equity or the net assets or thenet worthor capital of the company and according to the accounting equation, net worth must equal assets minus liabilities.
Another way to look at the same equation is that assets equals liabilities plus owner'sequity. Looking at the equation in this way shows how assets were financed: either by borrowing money (liability) or by using the owner's money (owner's equity). Balancesheets are usually presented with assets in one section and liabilities and net worth in theother section with the two sections "balancing."Records of the values of each accountor line in the balance sheet are usually maintained using a system of accounting known as the double-entry bookkeeping system. A business operating entirely in cash can measure its profits by withdrawing the entire bank balance at the end of the period, plus any cash in hand. However, many businessesare not paid immediately; they build up inventories of goods and they acquire buildingsand equipment. In other words: businesses have assetsand so they can not, even if they want to, immediately turn these into cash at the end of each period. Often, these businesses owe money to suppliers and to tax authorities, and the proprietors do not
 
withdraw all their original capital and profits at the end of each period. In other words businesses also haveliabilities.
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[edit] Origin
It was the Flemish mathematicianSimon Stevinwho persuaded merchants to make it arule to summarize accounts at the end of every year in a chapter entitled
Coopmansbouckhouding op de Italiaensche wyse
(Dutch: "Commercial Book-keeping inthe Italian Way") of his
Wisconstigheg hedachtenissen
(Dutch: "Mathematical memoirs",Leiden,1605-08). Although the balance sheet he required every enterprise to prepareevery year was based on entries of the ledger, it was prepared separately from the major  books of account. The oldest semi-public balance sheet recorded was that of the EastIndia Company dated 30th April1671, which was submitted to the company'sGeneral Meetingon in 30th August 1671. The publication and audit of the balance sheet was still a rarity in England until the passing of theBank Charter Act 1844.
[edit] Types
A balance sheet summarizes an organization or individual's assets, equity and liabilities ata specific point in time. Individuals and small businesses tend to have simple balancesheets.
 
]
Larger businesses tend to have more complex balance sheets, and theseare presented in the organization's annual report.
 Large businesses also may prepare balance sheets for segments of their businesses.
A balance sheet is often presentedalongside one for a different point in time (typically the previous year) for comparison.
 
]
[edit] Personal balance sheet

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