How The BALANCE SHEET Works (Statement of Financial Position / SOFP)

The 'Balance Sheet', or 'Statement of Financial Position' (SoFP) is one of the three major Financial Statements, along with the Income Statement and the Statement of Cash Flows. In this tutorial, you'll find out what the Balance Sheet is and how to derive it using the basic principles of 'Double Entry Accounting'. Together we'll build our own Balance Sheet from scratch using six example transactions.

⏱️TIMESTAMPS
00:00 - Intro
00:34 - Why the Balance Sheet is Important
01:42 - What a Balance Sheet Looks Like
02:16 - Balance Sheet Definition
02:40 - Rule: Assets = Liabilities + Equity
03:05 - Past vs Present
03:54 - Core Principle: Double-Entry Accounting
04:35 - The Basic Accounting Equation
04:58 - The Balance Sheet is a Snapshot
05:16 - How to Make a Balance Sheet
05:42 - Current Assets Definition
05:56 - Non-Current Assets Definition
06:15 - Current Liabilities Definition
06:28 - Non-Current Liabilities Definition
06:35 - Equity and Retained Earnings
07:28 - Balance Sheet Example
11:01 - Retained Earnings: Linking the Income Statement and the Balance Sheet

🔝 CLOUD ACCOUNTING SOFTWARE

🔗VIDEO LINKS

🔎FAQ

🚶FOLLOW ME ON

🎬LEARN ACCOUNTING BASICS FOR FREE
________________________
DISCLAIMER

Some of the links above are affiliate links, where I earn a small commission if you click on the link and purchase an item. You are not obligated to do so, but it does help fund these videos in hopes of bringing value to you!
________________________

#accounting #accountant #accountingstuff

[AccountingStuff]

I've had loads of requests for this one, so cheers for those! If you'd like a deeper explanation of some of the topics mentioned then here are the links...


The three components of the Balance Sheet:


Support for the Worked Example:


Timestamps:

00:00 - Intro
00:34 - Why the Balance Sheet is Important
01:42 - What a Balance Sheet Looks Like
02:16 - Balance Sheet Definition
02:40 - Rule: Assets = Liabilities + Equity
03:05 - Past vs Present
03:54 - Core Principle: Double-Entry Accounting
04:35 - The Basic Accounting Equation
04:58 - The Balance Sheet is a Snapshot
05:16 - How to Make a Balance Sheet
05:42 - Current Assets Definition
05:56 - Non-Current Assets Definition
06:15 - Current Liabilities Definition
06:28 - Non-Current Liabilities Definition
06:35 - Equity and Retained Earnings
07:28 - Balance Sheet Example
11:01 - Retained Earnings: Linking the Income Statement and the Balance Sheet

[LawrenceNo]

Hey man! I just started watching through your whole series. You have single-handedly SAVED my educational life with these videos! I LOVE

[AthensCotterill]

I’ve been studying business for 5 years now and it always confused me that equity didn’t come under assets because I thought it was what the business owned. But now that it’s been worded as ‘what the business owes to the owners’ I understand. I’m kind of mind blown that it confused me for 5 years and now it’s been cleared up by a single sentence.

[ImranKhan-skzt]

This channel is so underrated, DESERVES MORE LOVE AND SUPPORT :)

[garrettfrazey]

I love the incredible dedication this guy has to making quality accounting videos. Even most of the cut scenes are filmed himself and have him in it, so good. What a dedicated legend.

[TheMandolinn]

I have literally gained more knowledge from your videos than an entire term of grad school. Thank you so much,

[leticiayacoub]

Hey,
I'm a first year student taking a course on accounting, and your videos are really helping me out atm. Even better than my professor's courses...
Thanks a lot!!!

[AmandaSantos-rwlp]

You are the reason I passed my Legal Accounting exams - THANK YOU FOR WHAT YOU DO! I honestly cannot thank you enough for dedicating your time and energy to making this all makes sense for so many people

[luisenterone]

Thank you very much!
I'm still a high school student but I already learned how to understand and build income statements and balance sheets because of your very informative vids. I think I'll aspire to become an accountant someday, your videos helped me a lot on picking a nice course to get in college. Thank you very much and God Bless!

[xxktbby]

I'm studying for my Architect's license and one of the exams focuses on owning and operating a firm. I've never taken an accounting/business course in my entire life and the way you described these financial statements helped me to completely understand the financial operations of a firm. Thanks so much! Even appreciated the landscape and design imaginary company as example.

[squezary]

Hell of a lot more informative than my university material. Thank you

[khoichugia]

Without a doubt, you are a true legend. Period.

[RyanDykstra]

Thanks so much for your videos! I spent hours staring at the textbook, and spent 30 watching your videos and it explained it better!

[glenngt]

One of the best I ever in explaining the financial topic that I ever find in my easy and fast in understanding it👍🏻👍🏻👍🏻👍🏻👍🏻

[alexsitdikov]

Few days ago paid for tutorial "Accounting and finance" in udemy and now realised I should not. The best tutorial I have ever seen. Very good examples.

[samlin]

I just started watching this one and the "income statement" I have to say you explain very clearly because you're not skipping some little details assuming beginners like me already knows. Thanks I will be watching more of your videos as my assignment is related to your videos.

[hayatali]

Going to my final year of study and omg do make it sound so easy and straight forward. After years of confusion and long hours of trying to understand this, I have finally understood it!! thank you :')

[crystalcoby]

I love how you have timestamped this video. Really helpful

[nima]

I'm incredibly grateful for this. Accounting is one of my modules for uni and I have been struggling with constructing a balance sheet until I came across this video. This step-by-step video has helped profusely - thank you so much.

[obiodigboh]

I have to applaud the lengths you've gone to to make these videos. I'm sure it's very time consuming since the production value is so high.... much appreciated by nearly 30, 000 people. I'm sure you'll help a lot more people who previously struggled with accounting in the future...thanks a million