Essential Balance Sheet Components & Definitions
Posted on Mar 31, 2025 in Economy
Balance Sheet Components
- Non-Current Assets: Includes items like Property, Plant, and Equipment.
- Current Assets: Cash + Debtors + Stock
- Total Assets: Non-Current Assets + Current Assets
- Current Liabilities: Bank Overdraft + Trade Creditors + Other Short-Term Loans
- Non-Current Liabilities: Long-Term Borrowings
- Total Liabilities: Current Liabilities + Non-Current Liabilities (Derived from Accounting Equation: Assets – Equity)
- Net Assets (Equity): Total Assets – Total Liabilities
- Equity Components: Share Capital + Retained Profit
Financial Term Definitions
- Assets
- All items of value owned by the business. They are categorized into current assets and non-current assets.
- Current Assets
- Items of value owned by the company that are expected to be converted into cash within one year or one operating cycle.
- Non-Current Assets
- Long-term tangible and intangible items owned by the company, not intended for resale, which contribute to the business’s operations over multiple years (e.g., property, plant, equipment).
- Current Liabilities
- Obligations or funds that a company owes and expects to pay within one year or one operating cycle.
- Non-Current Liabilities
- Obligations or funds that a company owes, with payment due dates extending beyond one year.
- Gross Profit
- The profit a company makes after deducting the costs associated with making and selling its products (Cost of Goods Sold) from its total revenue.
- Opening Stock (Inventory)
- The value of goods owned by the business at the beginning of an accounting period, carried over from the previous period.
- Net Profit
- The final profit remaining after all expenses (operating expenses, interest, taxes) have been deducted from total revenue.
- Expenses
- Costs incurred by a firm to operate effectively, such as administrative staff salaries, rent, utilities, and advertising.
- Retained Profit (Retained Earnings)
- The portion of a company’s net profit that is not distributed to shareholders as dividends but is kept by the company, usually for reinvestment or debt repayment.
