the balance sheet captures the financial position of a company as of for particular

date either the end of a quarter or end of a year. It comes of three parts assets,
liabilities, and shareholder's equity.

These parts show what the company owns, what it owes and how much shareholders have
invested in the company.

Assets represent the resources owned by a company and are used to generate future
economic benefits in the form of either higher cash inflows or lower cash outflows.

Cash inflow�is the money going into a business. That could be from sales,
investments or financing. It's the opposite of�cash�outflow, which is the money
leaving the business. A business is considered healthy if its�cash inflow�is
greater than its�cash�outflow.

Examples of assets are cash and equivalents, inventory, property, plant and
equipment, and intangible assets like patents and trademarks.

Assets are further classified into current and non-current assets.

Current assets are those assets that are expected to be converted to cash Sold or
consumed within the next one year. Any asset that is expected to
be converted to cash, sold or consumed after one year, is categorized as a non-
current asset.

Liabilities represent the company's economic obligations to outsiders. These

outsiders have claims against the company's assets. Examples of liabilities are
accounts payable, short-term borrowing, and long-term debt.
Similar to assets, liabilities are also classified into current and non-current
liabilities. Current liabilities are those that
are expected to be paid within one year, while any expected to be paid after one
year is a non-current liability.

The last part of a balance sheet is the shareholder's equity. This represents the
company owners' claims on the company's total assets. It consists of owners'
investment in the company as well as aggregate undistributed profits called
retained earnings. The balance sheet gets its name as it has to balance sold at all
times, that is assets must equal liabilities plus shareholder's equity. Assets
represent how the company uses its resources but it's liabilities and shareholder's
equity represent where the company gets its resources from. These must equal each
other at all times. One of the important things to remember
about the balance sheet is that all items are recorded at historical cost. They are
never updated to current market values or prices. In a balance sheet, assets
typically appear on the left side or at the top. And liabilities and shareholders�
equity appear on the right side or at the bottom. However, this may vary from
country to country, depending on local accounting roads. In some countries the
order may be reversed. Next time, we will start looking at the balance sheet in
greater detail, starting with the assets side of the balance sheet.