Finance: What is a Balance Sheet?

What is a balance sheet? A balance sheet is a financial document that public corporations are required to use. It shows their assets and liabilities (what they have and what they owe). It also includes shareholder’s equity, or how much is invested in the company, and this number combined with liabilities should be equal to assets (balanced).

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Transcript

00:28

brother Inc. you have total assets of $142 with current assets of a hundred

00:33

bucks .80 bucks of that current asset set is cash and twenty dollars is an IOU

00:38

from the tooth fairy ie dad ,who woke you up last night [clown next to child's bed]

00:41

replacing the tooth and since you're old enough you just winked and he said yeah

00:45

I'll get you a twenty from my wallet in the morning. note that if he'd said I'll

00:48

get it for you a year and change from now. it wouldn't be a current asset it

00:54

would be a long-term asset, because current means that a promise or a

00:58

product or whatever turns into cash within a year. you mowed the lawn for the [assets listed]

01:02

summer for mrs. garden bottom and billed her $500. she paid you four hundred

01:07

ninety dollars and still owes you ten bucks. that money lives in your balance

01:11

sheet on the assets side as an account receivable. you have four hundred ninety

01:16

seven little blue marbles as your only asset which your friend Billy has

01:19

offered you tons of times to buy for twenty four dollars so you can hold that [kids exchange marbles and money]

01:24

amount as inventory. it's an asset. since you know you deal in marbles regularly.

01:28

and you paid ten dollars for ten year rights to enter your sister Jeannie's

01:32

room anytime you want. you still have eight years to go on that paper so you'd

01:36

depreciate its value at a dollar a year worth eight bucks today. total everything [balance sheet shown]

01:40

up and you have that one hundred forty two dollars in assets on your own

01:44

personal balance. sheet okay so what about your liabilities. well you have

01:48

total liabilities of a hundred dollars. you owe Joe lunch bully thirty bucks to

01:53

learn why you'll stop hitting yourself. or rather to stop doing so you owe him

01:58

thirty bucks tomorrow and you know you'll owe him sixty bucks a year in

02:02

change from now maybe more in the future and maybe not if you grow and put on a [ laughing boy is offered cash]

02:07

few pounds. but you are conservative financially so you reserve that 60 bucks

02:10

as if it's a certain long-term debt, so it goes down there on

02:15

line 13 .you borrowed ten bucks from your boo

02:18

Amy the auditor for lunch she actually submitted to you an invoice. albeit

02:22

romantically. so you have ten bucks on line eight there .so you have one hundred

02:26

forty two dollars in total assets and a hundred dollars in total liabilities, but

02:30

wait they don't balance. oh no what shall we do ?well a balance sheet accounts for

02:35

this it's called ale and it stands for assets minus liabilities equals equity. [man gives thumbs up]

02:41

well you have assets $142 we just outlined and you can subtract your

02:45

liabilities which we just outline of a hundred bucks and you have net equity

02:49

value to your life of $42. it looks like little brother Inc doesn't have to worry

02:55

about filing for bankruptcy anytime in the near future which is good because

02:58

with Joe lunch bully in the picture, life is hard enough as it is. [kid frowns as bully pushes his own hand in his face]