What Is a Balance Sheet Item?
A balance sheet is one of several different financial statements that provide glimpses into an organization's financial health at particular times. Within this financial statement, there are main categories, such as assets, liabilities, and shareholder's equity, in addition to subcategories. A balance sheet item is the financial information that represents each of these groupings at the present time in an organization. An individual balance sheet item does not portray the full financial picture of an organization, but combined, this data could determine how profits and sales can be achieved in the future.
The presentation of a balance sheet item may differ based on the way that a company selects to display this information. An organization may choose to incorporate the balance sheet portion of a quarterly or yearly income statement, which is another common financial statement that companies release, at the very front of the financial document. Each balance sheet item might be grouped in one of two columns on the page, or every line item might be displayed vertically with no separation down the center of the statement. Items that can most quickly be converted to cash are typically listed at the top. These are the most liquid balance sheet items on the financial statement.
Common balance sheet items might include a value for a company's assets, such as cash, products, and equipment, in addition to liabilities, or financial obligations. Also, there are different types of assets and liabilities, each of which is listed as a separate balance sheet item. Fixed assets, for instance, are tangible items including furniture, equipment, and infrastructure, to name a few. Debts that will extend beyond the current reporting period are considered long-term liabilities, and these are listed separately as well. Equity stakeholders represent another balance sheet item.
There is a mathematical equation that coincides with a balance sheet. It is the combination of liabilities with equity to represent an organization's assets. A company uses assets for the ongoing operation of the organization.
The values on a balance sheet are an accurate depiction of a company's financial status when the document is filed, but those items continue to change. Nevertheless, this filing is used by industry professionals, such as research analysts in addition to company executives, to project the future financial status of an organization. An organization's board of directors might also use the the balance sheet line items to point a company's management team toward future financial goals.
Discuss this Article
Post your comments