It is the statement that lists the set of rights (Assets) and obligations (Liabilities) of the company on a specific date. The difference between Assets and Liabilities is the Net Equity and represents the capital invested by the owners of the company, either by funds brought from outside the company (third party funds) or generated by it and its operations and withheld internally (own funds).
The Assets list what actually exists in the company. All the goods and rights can be evidenced by means of documents, tangible or visible. The only exceptions are the advanced and deferred expenses, which represent investments that will benefit the following fiscal years.
The Liabilities and the Net Equity show the origin of the funds invested in the Assets, this is the reason for the Assets accounts being debtors of the Liabilities.
The Capital represents the partner's money and/or goods invested on the organization of the company. It is only an informative element, not anything concrete.
Any variation in the Assets and Liabilities in relation to what their correct amounts should register are reflected in the Net Equity, which will be closer or less close to reality according to probable deviations of these Assets and Liabilities.
Besides, you must remember that the balance sheet shows only recordable facts, according to the accounting principle, i.e., facts objectively measurable in money, like purchases, sales, payments, collections, deposits, automatic debits, expenses incurred, billing, etc., leaving aside a series of countless facts like trademarks, market share, image, technology, etc.
In accordance with articles 178 to 184 of Law nr. 6,404/76, the Balance Sheet must contain the following account groups:
Balance Sheet
ASSETS | LIABILITIES |
Short term Assets | Current Liabilities |
Cash and cash equivalents | Payables to Suppliers |
Short-term Receivables | Financial Liabilities |
Accounts Receivable from Customers | Tax Liabilities |
Inventory | Labor Liabilities |
Taxes to be Reimbursed | Provisions |
Short-term Temporary Investments | |
Other Short-term Rights | Long-term Liabilities |
Pre-paid Expenses | Payables to Suppliers |
Financial Liabilities | |
Long-term Realizable Assets | Other Liabilities |
Accounts Receivable | |
Other Credits | Deferred Income |
Long-term Temporary Investments | |
Deferred Expenses | Net Equity |
Share Capital | |
Permanent Assets | Reserves |
Investments | Accrued Profits and Losses |
Fixed Assets | |
Deferred Charges |
See Also
- When to prepare the Balance Sheet
- How to Prepare the Balance Sheet
- Creating a Balance Sheet with a Managerial View
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