What is a balance sheet?

The balance sheet is one of the three essential financial statements investors must understand to analyze businesses.

The balance sheet formula is Assets = Liabilities + Shareholder Equity.

The balance sheet is similar to a company's net worth statement. It tells investors how much the company has in assets (e.g., cash, property), liabilities (how much money it owes to vendors, banks, and bondholders), and shareholder equity (its net worth on paper).

Like your net worth, balance sheets are measured at a specific point in time, such as December 31, 2023. They are a snapshot of a company’s net worth.

Just as you might determine your personal net worth by subtracting your liabilities from your assets, the balance sheet follows a similar formula to establish shareholders’ equity.

Like the income statement, the balance sheet uses accrual accounting. This means revenue & expenses are recorded when a transaction occurs, regardless of whether a payment has been made.

Balance Sheet Synonyms

Unfortunately, balance sheets do not have a universal look or layout.

On top of that, management teams will often use interchangeable words and terms when creating their balance sheets or discussing them with investors.

That's because executives have complete autonomy over the terms and layouts of their financial statements.

These factors can understandably confuse investors. For instance, you might hear a CEO talk about increasing revenue costs in the conference call, but when you look at the balance sheet, you cannot find that term.

​To help dispel some of this confusion, here are other words that management teams can use when creating their balance sheet:

BALANCE SHEET:

→Net Worth Statement

→Financial Status Report

→Statement of Financial Position

→Statement of Financial Condition

CASH:

→Cash on Hand

→Cash Assets

→Liquid Assets

→Cash Reserves

→Marketable Securities

ACCOUNTS RECEIVABLES:

→Receivables

→Bills Receivable

→Debtor Balances

→Trade Receivables

→Outstanding Invoices

INVENTORY:

→Stock

→Goods

→Merchandise

→Product Stock

→Goods

OTHER CURRENT ASSET:

→Deposits

→Notes Receivable

→Prepaid Expenses

→Deferred Tax Assets

→Short-term Investments

LONG TERM INVESTMENTS:

→CDs

→Bonds

→Stocks

→Pension Funds

→Long-term Notes Receivable

GOODWILL:

→Blue Sky Value

→Excess Earnings

→Purchased Goodwill

→Consolidation Surplus

→Business Reputation Value

OTHER LONG-TERM ASSETS:

→Intangible Assets

→Deferred Tax Assets

→Right-of-Use Assets

→Long-Term Receivables

→Property, Plant, and Equipment (PPE) 

PAYABLES:

→Supplier Debt

→Outstanding Bills

→Unpaid Expenses

→Accounts Payable

→Accrued Expenses

SHORT-TERM DEBT:

→Notes

→Liquid debt

→Current debt

→Liquid debt

→Liquid debt

→Immediate debt

OTHER SHORT-TERM LIABILITIES:

→Notes Payable

→Short-term Loans

→Dividends Payable

→Deferred Revenue

→Income Taxes Payable

LONG-TERM DEBT:

→Senior Debt

→Long-term Loans

→Long-term Borrowings

→Convertible notes

→Long-term Bonds Payable

OTHER LONG-TERM LIABILITIES:

→Minority Interest

→Pension Obligations

→Deferred Tax Liabilities

→Long-term Capital Leases

→Long-Term Deferred Revenue

PREFERRED STOCK:

→Preferred Shares

→Preference Shares

→Preferred Equity

→Convertible Preferred Stock

→Senior Equity

COMMON STOCK:

→Common Equity

→Ordinary Shares

→Founders' Shares

→Common Shares

→Additional Paid-In Capital

RETAINED EARNINGS:

→Earned Surplus

→Accumulated Earnings

→Accumulated Profit

→Accumulated Deficit

→Accumulated Operating Losses

TREASURY STOCK:

→Own Shares

→Treasury Shares

→Reacquired Shares

→Shares in Treasury

→Share Repurchase

Key Takeaway

The balance sheet provides a crucial snapshot of a company’s financial health by detailing its assets, liabilities, and shareholder equity at a specific point in time.

Understanding the interchangeable terms and variations in layout helps investors navigate potential confusion when analyzing these statements. By mastering the balance sheet, investors can better assess a company's stability, leverage, and overall financial position.