What is a Balance Sheet?
A Balance Sheet is a financial statement that shows the assets,
liabilities, and owner's equity of a business at a specific date.
It helps stakeholders understand the financial position of a company.
Balance Sheet Formula
-
Assets = Liabilities + Owner's Equity
Elements of a Balance Sheet
1. Assets
- Cash
- Bank
- Accounts Receivable
- Inventory
- Land and Buildings
- Equipment
2. Liabilities
- Loans
- Accounts Payable
- Taxes Payable
- Salaries Payable
3. Owner's Equity
- Capital
- Retained Earnings
Example of a Balance Sheet
| Assets |
Amount (Frw) |
| Cash |
5,000,000 |
| Equipment |
10,000,000 |
| Total Assets |
15,000,000 |
| Liabilities & Equity |
Amount (Frw) |
| Loan |
5,000,000 |
| Capital |
10,000,000 |
| Total Liabilities & Equity |
15,000,000 |
Important Accounting Terms
- Assets – Resources owned by the business.
- Liabilities – Debts owed by the business.
- Capital – Owner's investment.
- Equity – Owner's share in the business.
- Retained Earnings – Accumulated profits not distributed.
- Current Assets – Assets expected to be converted into cash within one year.
- Non-Current Assets – Long-term assets.
Interview Questions
- What is a Balance Sheet?
- State the Balance Sheet equation.
- What are Assets?
- What are Liabilities?
- What is Owner's Equity?
- Why is a Balance Sheet important?
Support Center
Get professional Tax, EBM, Accounting and Irembo support.
Get Support