Balance Sheet

A balance sheet provides a snapshot of a company's financial position at a specific point in time. The key components are:

Assets: Resources owned by the company, categorized into:
Current Assets: Cash, accounts receivable, inventory, and other assets expected to be converted into cash or used within a year.
Non-Current Assets: Long-term investments, property, plant and equipment (PP&E), intangible assets like patents or trademarks.
Liabilities: Obligations or debts owed by the company, divided into:
Current Liabilities: Short-term debts and obligations expected to be settled within a year, such as accounts payable and short-term loans.
Non-Current Liabilities: Long-term debts and obligations due beyond one year, such as bonds payable and long-term leases.
Equity: The residual interest in the assets of the company after deducting liabilities, which includes:
Common Stock: Funds raised from issuing shares.
Retained Earnings: Cumulative earnings not distributed as dividends.
Additional Paid-In Capital: Amount paid by investors above the par value of the stock.
Treasury Stock: Shares repurchased by the company.
The fundamental equation that represents the balance sheet is:

Assets = Liabilities + Equity

This equation ensures that the balance sheet remains balanced, reflecting the financial position of the company accurately.

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