Balance Sheet Components

Balance Sheet Components

A balance sheet provides detailed information about a company’s assets, liabilities and members’ equity.

Assets are things that a community owns that have value. This typically means they can either be sold or used by the community to provide services that can be sold. Assets include physical property, such as plants, trucks, equipment and inventory. It also includes things that can’t be touched but nevertheless exist and have value, such as trademarks and patents. And cash itself is an asset. So are investments a community makes.

Liabilities are amounts of money that a community owes to others. This can include all kinds of obligations, like money borrowed from a bank, vehicle leases, money owed to suppliers for materials, payroll, environmental cleanup costs, or taxes owed to the government.

Members’ equity is sometimes called capital or net worth. It’s the money that would be left if a community sold all of its assets and paid off all of its liabilities. This leftover money belongs to the members, or the owners, of the community.

The following formula summarizes what a balance sheet shows:

ASSETS = LIABILITIES + MEMBERS' EQUITY

A community's assets have to equal, or "balance," the sum of its liabilities and members' equity.