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Balance Sheet Basics Summary PDF
Balance Sheet Basics Summary PDF
ACCOUNTING FUNDAMENTALS
All companies must follow a set of rules that standardizes the The three elements of a balance
reporting and recording of their financial data. sheet are assets, liabilities, and
equity.
While US companies follow Generally Accepted Accounting
Principles (GAAP), companies in most other countries follow the
International Financial Reporting Standards (IFRS).
The balance sheet gives a glimpse into the health and Balance sheet equation:
composition of a business.
assets = liabilities + equity
Double-entry bookkeeping: A transaction requires at least two This is also known as the
entries to keep the balance sheet balanced. accounting equation.
Dual-aspect concept: If there is a change in the total amount of
assets, there needs to be a resulting change in liabilities, equity,
or both.
Money-measurement concept: Only items expressed as Fair value: The reasonable
monetary amounts can go on a balance sheet. amount for which an item could
be sold in the marketplace.
Entity: A business, company, or organization.
Cost: The original amount paid
Entity concept: A business’ finances are separate from its for an item.
owner’s finances.
Going-concern concept: Accounting assumes that an entity will
operate indefinitely.
Noncurrent assets will not be used up or converted into cash for TOTAL ASSETS $ 2,050
at least one year. For example: