What is the difference between balance sheet and financial statement? Identify various purposes of balance sheet and financial statements.
Balance sheet
The balance sheet can inform where a company stands financially, and is separated into three main sections - assets, liabilities, and equity. A company's assets must be equal to (or "balance" out) its liabilities plus equity.
Assets are generally listed in order of liquidity, or the ease in which they can be sold or otherwise disposed. Assets are divided into two subcategories -- current and long-term. Current assets include those items that can be converted to cash within one year or less. For examples, current assets include such things as:
Cash and equivalents
Securities that have a liquid market
Accounts receivable
Inventory
Prepaid expenses
Long-term assets include everything else, and cannot be readily liquidated. Some examples of long-term assets you may find on a company's balance sheet include:
Securities without a liquid market
Land
Equipment
Buildings
Intellectual property
Other intangible assets
Liabilities are organized in a similar manner, with current (within one year) liabilities such as rent, tax, utilities, interest payable,
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