All companies seek to know their financial position throughout the financial year and provide daily reports on the financial condition of the company, to determine the financial position of the company, and these reports are called financial statements.
Financial statements help in understanding the financial statements of the company or establishment. The financial statements are a good way to monitor the general performance of the company in each financial period. The financial statements are divided into three lists: income, balance sheet, and property rights.
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Balance Sheet
Balance sheet, also known as the list of financial positions, is a financial report that is issued at the end of each fiscal year, and is used to know the financial position of the company from profits, expenses, and losses, and thus know the general status of the company, the securities and cash holdings of the corporation and its liabilities, and the budget components depend on the nature of the company’s activity, and it includes some accounting terms such as property rights and assets.
Basic Equation
The budget equation is as follows:
assets = liabilities + equity (shareholders and individuals (
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Balance Sheet Components
The Left Side (Asset)
All assets and properties of the company are divided into two parts:
Fixed Assets
It can be dealt with directly and it depends on some of the physical components, which are used for long periods, including computers, vehicles, land, and so on.
Assets
Assets that can be sold or bought, and can also be reused, including bank loans, securities, or a facility fund.
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Commitments
Companies towards merchants, customers, and clients who cooperate with them and those obligations may be long-term, such as financial loans, or medium-term, such as checks that are cashed at the date of exchange, or short term, such as purchases.
Property Rights
The rights owned by companies to shareholders, owners, and capital, and are owners of the company, as they have ownership rights in the budget.
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Steps to Create a Balance Sheet
The following steps should be followed:
Drawing a balance sheet where the table is shaped like the letter (T); the right side contains all of the property rights and obligations, and the left side contains the assets.
Divide the assets into:
Current assets fixed assets, with details of each type of asset that includes all financial operations during financial periods, then perform some calculations to get their value together.
Divide the obligations into long-term obligations, medium-term obligations, and long-term obligations, and perform some calculations to obtain their financial value.
The total value of equity, such as shares, capital, which are combined with the sub-value of the liabilities to determine the value of the equity and liabilities.
Value of equity with the value of the assets, by applying the basic equation for the balance sheet.
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