Statement of Financial Position (Balance Sheet)
Think of the balance sheet as a financial snapshot that shows what a company owns versus what it owes at a specific moment in time. The fundamental equation you need to memorize is: Assets = Liabilities + Owner's Equity. This equation must always balance - that's why it's called a balance sheet!
Current assets are resources the company can turn into cash within one year. These include cash, accounts receivable (money customers owe you), inventory (goods for sale), and prepaid expenses (like paying rent in advance). They're listed in order of liquidity - how quickly they can become cash.
Non-current assets stick around for more than a year and help generate long-term value. Property, plant, and equipment (buildings, machinery, vehicles) are the most common, along with long-term investments and intangible assets like patents or trademarks.
Pro Tip: Current assets are arranged by liquidity - cash first, then accounts receivable, then inventory. This order matters for financial analysis!
Don't forget about contra assets like Allowance for Doubtful Accounts and Accumulated Depreciation - these reduce the value of assets to show their true worth. Liabilities work similarly, splitting into current (due within a year) and non-current (due after a year).