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Key Components

A. Assets (What the company owns)

• Current Assets – Short-term resources convertible into cash within a year (e.g., cash, accounts receivable, inventory).
• Non-Current Assets – Long-term assets not easily convertible to cash (e.g., property, equipment, intangible assets).

B. Liabilities (What the company owes)

• Current Liabilities – Short-term financial obligations due within a year (e.g., accounts payable, short-term loans, taxes).
• Non-Current Liabilities – Long-term obligations extending beyond a year (e.g., bonds payable, long-term loans, pension liabilities).

C. Equity (Net worth of the company)

• Share Capital – Funds raised through issuing shares.
• Retained Earnings – Accumulated profits reinvested in the business.
• Reserves – Funds set aside for future use or contingencies.

Importance of the Balance Sheet

• Helps assess liquidity and financial stability.
• Provides insights into company leverage and solvency.
• Assists in investment and creditworthiness evaluation.