The balance sheet is a financial statement which indicates the condition of a company on a specific date. It is called a balance sheet because it expresses the basic accounting formula: Assets = Liabilities + Owners’ equity.( Owners’ equity is sometimes referred to as net worth.) The left side of the balance sheet itemizes the firm’s assets. Assets are anything of value to a company. On a balance sheet the value is always expressed in terms of money. Companies have different types of assets. They are usually divided into two groups: current assets and fixed assets.
Current assets are either cash or items which will be turned into cash during the current business period, such as merchandise to be sold and payments to be received. In addition to cash, inventories, and receivables, companies sometimes have stocks and bonds. These are referred to as securities. All of these assets, such as cash and those readily turned into cash, are known as liquid assets, such as cash and those readily turned into cash, are known as if a company needs to have more cash for one reason or another, it can liquidate some of its stocks and bonds. On the other hand, merchandise which is not selling quickly because there is not much demand is not very liquid, even though it is considered as current assets.