Balance sheet explained to kids

A balance sheet is a financial statement that reports a company's assets, liabilities, and shareholders' equity at a specific point in time. Assets are everything the company owns and can use to pay its debts. Liabilities are everything the company owes to others. Shareholders' equity is the difference between the total assets and total liabilities. A company's balance sheet can give you a good idea of its financial health. If the company has more assets than liabilities, it has a positive net worth and is in good financial health. If the company has more liabilities than assets, it has a negative net worth and is in poor financial health. The balance sheet is one of the three major financial statements. The other two are the income statement and the cash flow statement. The balance sheet, income statement, and cash flow statement are all interrelated. Together, they give you a complete picture of a company's financial situation. The balance sheet is divided into two sections: the assets side and the liabilities and shareholders' equity side. The assets side lists all of the company's assets, which are everything the company owns and can use to pay its debts. The liabilities and shareholders' equity side lists all of the company's liabilities and shareholders' equity. Assets are divided into two categories: current assets and non-current assets. Current assets are assets that can be converted into cash within one year. Non-current assets are assets that cannot be converted into cash within one year. Liabilities are also divided into two categories: current liabilities and non-current liabilities. Current liabilities are debts that must be paid within one year. Non-current liabilities are debts that must be paid after one year. Shareholders' equity is the difference between the total assets and total liabilities. It consists of two parts: common stock and retained earnings. Common stock is the money that shareholders have invested in the company. Retained earnings are the profits that the company has earned and reinvested back into the business.