Chapter 5

Reporting Financial Condition

In This Chapter

arrow Reporting financial condition in the balance sheet

arrow Reading the balance sheet

arrow Categorizing business transactions

arrow Connecting revenue and expenses with their assets and liabilities

arrow Examining where businesses go for capital

arrow Understanding balance sheet values

This chapter explores one of the three primary financial statements reported by businesses — the balance sheet, which is also called the statement of financial condition and the statement of financial position. This financial statement is a summary at a point in time of the assets of a business on the one hand, and the liabilities and owners’ equity sources of the business on the other hand. It’s a two-sided financial statement, which is condensed in the accounting equation:

Assets = Liabilities + Owners’ equity

The balance sheet may seem to stand alone — like an island to itself ...

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