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Accounting Allah shmoop balance sheet At some point in our

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little drone company's founding eyes in the sky there was

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likely a bank account Cash was injected into that bank

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account by investors who might also be the founders of

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the company And then cash was paid out of that

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bank account Teo you know cover salaries and buy stuff

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like plastic mouldings and batteries and GPS control systems and

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the hazelnut clearance cops in the office Yeah on the

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very first day that the company was founded the balance

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sheet might have looked like this Just fifty grand in

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cash Sitting there shareholder Exactly There's fifty grand and while

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no liabilities they're just sitting there So before we dig

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in our heels a few quick definitions to help you

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better understand this thing Our assets It's stuff you have

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Well you might have a lot of love but that

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doesn't go as an asset Liabilities Yes stuff you owe

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like you buy plastic mouldings and you promise to pay

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in thirty days You owe That is a short term

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liability payable in thirty days And at the end of

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the day what's left Well that's that equity So notice

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we had fifty thousand in cash the first day and

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fifty thousand of equity So yeah that's where all that

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come from All right moving on Well what are these

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arcane terms you've probably never heard of before Think Ale

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Assets minus liabilities equals equity or shareholder's equity and that

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is the accounting equation So why is shareholder's equity floating

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somewhere between assets and liabilities on the bottom of the

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balance sheet Almost like it's hiding well because it's the

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balance of the two If you have more assets than

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liabilities you have positive shareholder's equity Let's give you an

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allegory that you probably can relate to You're home According

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to the kindly loving people at Zillow your home is

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worth four hundred seventy two thousand dollars That home is

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an asset of yours but you also have a liability

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on it Called a mortgage you owe one hundred twenty

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thousand dollars to the kindly loving people of Bank of

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America You have equity in the home or essentially shareholder's

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equity of three hundred fifty two thousand dollars That's kind

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of you Your own personal little balance sheet There The

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same notions hold true for a company's balance sheet Remember

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abound Sheets a Kodak snapshot of a moment in time

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financially speaking that gives a clear picture of your current

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wealth or net assets or equity ownership in a given

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thing It's all about the ale you know especially when 00:02:17.693 --> [endTime] you get your mortgage statement tasty

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