Courses / Balance Sheet

Balance Sheet

30 Lessons | 5 Quizzes

Balance sheet is one of the 3 major financial statements. It shows what the company owns and what it owes. We’ll start by learning about the purpose and accounting principles behind the balance sheet, how it’s organized, the common items that appear for most public companies, and then tie the balance sheet to our corporate valuation framework. This course will also set the stage for our upcoming course on Integrated Financial Statements, where we will learn how the 3 financial statements are interconnected with one another.

Key Takeaways:

  • How balance sheet is organized
  • Accounting principles and logic flow
  • Common items and what they mean


1. What is Balance Sheet?


The Balance Sheet ("B/S") is one of the three major financial statements that shows what the company owns and what it owes.

2. Assets and Liabilities


For the purpose of the Balance Sheet, Assets and Liabilities are things the company CONTROLS that either add or reduce value.

3. The Concept of Book Value


The values presented on the Balance Sheet is known as "Book Value".

4. The Accounting Equation


The Account Equation is Assets = Liabilities + Equity. But why must Assets equal Liabilities plus Equity?

5. Current Assets vs. Long-Term Assets


The Assets section of the Balance Sheet is divided into Current Assets and Long-Term Assets.

6. Review: Cash & Investments


In this lesson, we're going to recap what we learned previously about Cash & Cash Equivalents and Investments.

7. Accounts Receivables


Accounts Receivables represents the value of money customers owe to the company from goods and services that were already provided.

8. Inventory


Inventory is the value of the company’s products waiting to be sold.

9. Prepaid Expenses


Prepaid Expenses is the value of the cash payments the company made in advance for expenses, before they are incurred.

10. Property, Plant & Equipment (PP&E)


Property, Plant & Equipment ("PP&E") is the value of the company's properties, plants and equipment.

11. Intangible Assets


Intangible Assets are non-financial assets that lack a physical substance.

12. Goodwill


Goodwill is the catch-all value of all the other intangible assets that can’t be separately identified and quantified.

13. Current Liabilities vs. Long-Term Liabilities


Similar to the Assets section, the Liabilities section is divided into Current Liabilities and Long-Term Liabilities.

14. Review: Debt


In this lesson, we're going to review what we learned about Debt in the previous course on Corporate Valuation.

15. Deferred Revenue


Deferred Revenue is the value of money received from customers in advance for goods and services that the company has not yet provided.

16. Accounts Payable


Accounts Payable is the value of money the company owes to other businesses that have already provided goods and services to the company.

17. Accrued Expenses


Accrued Expenses is the value of money the company owes that have accrued over time. This mainly relate to rent, utilities and wages.

18. Income Tax Payable


Income Tax Payable is how much in taxes a company owes to the government.

19. Capital Lease


Capital Leases are lease arrangements that meet ownership characteristics under accounting rules.

20. Commitments and Contingencies


Commitments represent the company's future obligations and Contingencies represent potential liabilities that may or may not materialize.

21. Operating Items vs. Financial Items


In this lesson, we'll distinguish the operating assets & liabilities from financial assets & liabilities.

22. Shareholder's Equity


Shareholder's Equity is the value of the company’s assets entitled by the company's shareholders after deducting all liabilities.

23. Par Value of Common Stock


Par Value of Common is based on par value per share as stated in the company charter and the number of shares the company has issued.

24. Additional Paid-In Capital


Additional Paid-In Capital ("APIC") is the value of money that shareholders have put into the company above the Common Stock Par Value.

25. Treasury Stock


Treasury Stock is the shares that the company has repurchased from shareholders.

26. Retained Earnings


Retained Earnings is the amount of cumulative profit the company has earned for shareholders that hasn’t been paid through dividends yet.

27. Accumulated Other Comprehensive Income (Loss)


Accumulated Other Comprehensive Income or Losses is the cumulative unrealized gains or losses that the company has accumulated.

28. Non-Controlling Interest


Non-Controlling Interest ("NCI") is the value of equity that the company does not own in a subsidiary the company controls.

29. Making Sense of the Equity Section


In this lesson, we're going to establish the logical flow behind the Equity section.

30. Connecting Dots


Now that we learned all the major line items on the Balance Sheet, we'll tie everything together and connect the dots.