Elements of a balance sheet

Definitions to elements of the balance sheet following the ib business management structure

Balance sheet/ statement of financial position

Shows the value of an organization’s assets, liabilities and the owners’ equity at a particular point in time

Assets

The possessions of a businesss that have a monetary value, such as buildings, land, machinery, equipment, stock (inventory) and cash

Non-current assets/ fixed assets

Long-term assets or possessions of an organization with a monetary value but are not intended for resale within the next twelve months of the balance sheet date

Property, plant and equipment

Accumulated depreciation

The sum of the fall in a non-current asset’s value because of wear and tear over time

Current assets

Possessions of an organization with a monetary value, but intended to be liquidated within twelve months of the balance sheet date

Cash

The money an organization has either ‘in hand‘ (at its premises) and/or ‘at band‘ (i.e. in its bank account)

Debtors

The entities (individuals or businesses) that owe money to an organization as they bought goods or services on trade credit

Stock

The goods that a business has available for sale, per time period

Total assets

The sum of non.current assets and current assets

Current liabilities

The short-term debts of a business which need to be repaid within twelve months of the balace sheet date

Bank overdraft

Allow customers to temporarily take out more money than is available in their bank account

Trade creditors

The suppliers owed money as the business has purchased items on trade credit, so this form of current liability needs to be repaid at a future date

Short-term loans

Advances from a commercial lender that need to be repaid within 12 months of the balance sheet date

Other short-term liabilities

Non-current liabilities

The long-term debts of a business, falling due after 12 months of the balance sheet date

Borrowings (long term)

Total liabilities

The sum of current liabilities and non-current liabilities, i.e. the sum of all the monies owed by the business

Net assets

The overall valur og an organization’s assets after all its liabilities are deducted

Equity

Refers to the value of the owners’ stake in the business, i.e. what the business is worth at the time of reporting the balance sheet

Share capiral

The value of equity in a company that is funded by shareholders

Retained earnings/ retained profit

The equity in a business funded by net proft after tax, after dividends have been paid to shareholders