Balance Sheet: Explanation, Components, and Examples

The balance sheet includes information about a company’s assets and liabilities. Depending on the company, this might include short-term assets, such as cash and accounts receivable, or long-term assets such as property, plant, and equipment (PP&E). Likewise, its liabilities may include short-term obligations such as accounts payable and wages payable, or long-term liabilities such as bank loans and other debt obligations. This balance sheet also reports Apple’s liabilities and equity, each with its own section in the lower half of the report.

The company then will depreciate these assets over the five-year period to account for their cost. The depreciation expense is moved to the income statement where it’s deducted from gross profit. These assets are considered fixed, tangible assets because they have a physical form, will have a useful life of more than one year, and will be used to generate revenue for the company. They are noncurrent assets that are not meant to be sold or consumed by a company. Instead, a fixed asset is used to produce the goods that a company then sells to obtain revenue. The financial statement only captures the financial position of a company on a specific day.

It can be sold at a later date to raise cash or reserved to repel a hostile takeover. It is essential to carefully consider the best valuation method