Question

1. What is the purpose of a Balance Sheet?

2. What are the typical categories and subcategories for a balance sheet?
3. What is an intangible asset?

Answer 1

Answer 01:

A balance sheet is a financial statement that contains assets, liabilities and equity statement. The basic statement behind making a balance sheet is:

Asset = Liability + shareholder equity.

Balance sheets are found in the annual reports of a company and they help investors understand the amount of resources that a company has in terms of assets. Investors often compare the revenue that are generated by a company from the quantum of assets it employs to do so.

Answer 02:

Balance sheet is divided into 3 categories:

Assets: these are all the things that a company owns. This includes it land, building, cash, inventory, accounts receivable etc.

Liability.: these are all those things which company has to pay to others like long term debt, short term debt, bills payable etc.

Equity: This section includes the amount that Share holders of the company currently own. As stated above equity is equal to asset - liability. The section also contains any retained earnings that the company has.

Answer 03:

Intangible assets are all those assets that are important for a company but they can't be touched or felt. These may include assets like brand, reputation etc. It is very difficult to estimate the monetary value of these assets.