Selasa, 03 November 2009

The funtions of BALANCE SHEET

Financial statement are the final product of the process. They provide information on the financial condition of a company. The balance sheet, one type of financial statement provides summary of what company owns and what it owes on a particular day.
Assets represent everything of value that is owned by a business, such as property, equipment, and accounts receivable. On the other hand, liabilities are the debts owed by a company for example to suppliers, and banks. If liabilities are subtracted from assets the amount remaining is the owners or stockholders equity.
One key to understanding the accounting transactions of a business is to understand the relationship of its assets, liabilities, and owners equity. This is often representedby the fundamental accounting equation: asset equal liabilities plus owners equity , the picture is :


These three factors are expressed in monetary terms and therefore are limited to items that can be given a monetary value. The accounting equation always remains in balance. In the other words side one must equal the other.
The balance sheet expands the accounting equation by providing more information about assets, liabilities, and owners equity of a company at a specific time for example “December 31,2009” . It’s made up of two parts. The first parts lists the company assets, and the second part details liabilities and owners equity. Assets are divided into current assets. Cash, account receivable, and inventories are all current assets. Property, buildings, and equipment make up the fixed assets of company. The liabilities section of the balance sheet is often divided into current liabilities such as account payable and income taxes payable and long term liabilities such as bonds and long term notes.
The balance sheet provides a financial picture of a company on particular for this reason it is useful in two important areas. Internally, the balance sheet provides managers with financial information for company decision making. Externally, it gives potential investor data for evaluation of the company’s financial position


CLASS : 3 EB 03


NPM : 20207399


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