How to read a balance sheet

TYPE OF ASSETS

  • Current assets = convertible to cash in 1 year
    • Cash
    • Accounts receivable
    • Inventory
    • Prepaid expenses and deposits
  • Long-term assets = held for more than 1 year
    • Property, plant and equipment
    • Land and buildings

TYPE OF LIABILITIES

  • Current liabilities = payable within 1 year
    • Accounts payable
    • Accrued expenses
  • Long-term liabilities = due after 1 year
    • Long-term debt

OWNER’S EQUITY

  • This is the net worth of your business
    • Owner’s investment
    • Retained earnings