The Balance Sheet and Financial Disclosures

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The Balance Sheet
Financial Disclosures

Acct 301-B04
Spring 2014
Felicia Olagbemi

This paper will discuss the balance sheet, its components and the purpose of financial disclosures. The balance sheet and financial disclosures are both included in the annual report. The balance sheet is also known as the statement of financial position. Financial disclosures and the balance sheet are closely related. Common financial disclosures are allowance for uncollectable accounts, information about common stock, summary of significant accounting policies, descriptions of subsequent events and related third-party transactions. The balance sheet includes the entity’s assets, liabilities and shareholders’ equity.
The balance sheet has many components and is used to help portray the company’s financial position. ”Of all the financial statements issued by companies, the balance sheet is one of the most effective tools in evaluating financial health at a specific point in time.” (Schmidt, 2013) The balance sheet is also called the statement of financial position. It includes the assets, liabilities and shareholders’ equity for the entity. “A company’s balance sheet provides a snapshot of the assets it owns, liabilities it is responsible for, and whatever might be left over when subtracting assets from liabilities that represents owners' capital or shareholders’ equity.” (Fuhrmann, 2013) It is useful in providing information to assess the entity’s financial future. Though it is helpful in assessing the company’s future, it does not depict the market value of the entity. It does provide valuable information that can be used to judge the entity’s ability to pay its current obligations and judge its market value. “Financial position, as it is reflected by the records and accounts from which the statement is prepared, is revealed in a presentation of the assets and…...

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