What is the Balance Sheet?2:01 with Michael Watson
Introducing the Balance Sheet's high level structure.
[MUSIC] 0:00 Now we get to talk about the balance sheet, woo-hoo! 0:04 Of the three big financial statements, those being the balance sheet, P and L and 0:08 cash flow statements, the balance sheet has two major, unique characteristics. 0:14 The first is that the balance sheet is a snapshot statement at a specific time. 0:19 So unlike the P and L or cash flow, which will show line items over 0:25 a specific period of time, like a fiscal year or quarter, 0:29 the balance sheet will show a snapshot at the end of the period being reported on. 0:33 This is the balance sheet, as of the moment, at the end of the quarter or year. 0:40 If that's confusing, don't worry, we will elaborate on that further in this stage. 0:45 The second unique aspect of the balance sheet is that it balances. 0:50 Total assets will always equal total liabilities plus equity. 0:55 Or in other words, 1:00 total assets will always be balanced with total liabilities plus equity. 1:02 All right, so what does all that mean? 1:07 At a high level, and in what is an admittedly oversimplified explanation, 1:10 assets are property, or goods, or 1:16 things that you have purchased, or resources you own or have earned, 1:19 that will provide some positive value to your business at some point in time. 1:23 We'll talk through some examples here shortly. 1:28 Liabilities are the opposite of assets. 1:31 They are debts or obligations your business has incurred or committed to. 1:33 Then finally, there is equity. 1:38 This is the amount of capital that has been paid in and retained by the business. 1:41 Some people find it helpful to think about equity and 1:47 liabilities as being the source of the company's assets. 1:50 Okay. We'll elaborate on this more in the next 1:54 videos. 1:56 I just wanted you to have a sort of high-level picture before we dig in. 1:57
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