A balance sheet typically consists of three main parts:
Assets
Assets are resources owned by the company that are expected to bring future economic benefits. They are usually classified into:
Current Assets: These include cash, accounts receivable, and inventory that can be converted into cash within a year.
Non-Current Assets: These include property, plant, equipment, and intangible assets like patents and trademarks.
Liabilities
Liabilities are obligations that the company needs to settle in the future. They are categorized into:
Current Liabilities: These include accounts payable, short-term loans, and other debts that need to be paid within a year.
Non-Current Liabilities: These include long-term loans, bonds payable, and other debts that are due after one year.
Shareholders' Equity
Shareholders' equity represents the owners' claim after all liabilities have been settled. It includes:
Common Stock: The initial capital invested by the owners.
Retained Earnings: The accumulated profits that have been reinvested in the business.