ShmoopTube

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finance- a la shmoop. what is a balance sheet? well it's a snapshot. a financial

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reckoning of what you own ,and what you owe at a given moment in time. well note

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that a balance sheet is divided into columns like this. on the left are good [balance sheet pictured]

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things like things you own. on the right side are things you owe like debts or

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obligations you have to pay off. well think for the balance sheet of little

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brother Inc. you have total assets of $142 with current assets of a hundred

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bucks .80 bucks of that current asset set is cash and twenty dollars is an IOU

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from the tooth fairy ie dad ,who woke you up last night [clown next to child's bed]

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replacing the tooth and since you're old enough you just winked and he said yeah

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I'll get you a twenty from my wallet in the morning. note that if he'd said I'll

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get it for you a year and change from now. it wouldn't be a current asset it

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would be a long-term asset, because current means that a promise or a

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product or whatever turns into cash within a year. you mowed the lawn for the [assets listed]

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summer for mrs. garden bottom and billed her $500. she paid you four hundred

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ninety dollars and still owes you ten bucks. that money lives in your balance

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sheet on the assets side as an account receivable. you have four hundred ninety

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seven little blue marbles as your only asset which your friend Billy has

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offered you tons of times to buy for twenty four dollars so you can hold that [kids exchange marbles and money]

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amount as inventory. it's an asset. since you know you deal in marbles regularly.

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and you paid ten dollars for ten year rights to enter your sister Jeannie's

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room anytime you want. you still have eight years to go on that paper so you'd

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depreciate its value at a dollar a year worth eight bucks today. total everything [balance sheet shown]

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up and you have that one hundred forty two dollars in assets on your own

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personal balance. sheet okay so what about your liabilities. well you have

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total liabilities of a hundred dollars. you owe Joe lunch bully thirty bucks to

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learn why you'll stop hitting yourself. or rather to stop doing so you owe him

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thirty bucks tomorrow and you know you'll owe him sixty bucks a year in

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change from now maybe more in the future and maybe not if you grow and put on a [ laughing boy is offered cash]

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few pounds. but you are conservative financially so you reserve that 60 bucks

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as if it's a certain long-term debt, so it goes down there on

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line 13 .you borrowed ten bucks from your boo

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Amy the auditor for lunch she actually submitted to you an invoice. albeit

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romantically. so you have ten bucks on line eight there .so you have one hundred

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forty two dollars in total assets and a hundred dollars in total liabilities, but

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wait they don't balance. oh no what shall we do ?well a balance sheet accounts for

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this it's called ale and it stands for assets minus liabilities equals equity. [man gives thumbs up]

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well you have assets $142 we just outlined and you can subtract your

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liabilities which we just outline of a hundred bucks and you have net equity

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value to your life of $42. it looks like little brother Inc doesn't have to worry

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about filing for bankruptcy anytime in the near future which is good because

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with Joe lunch bully in the picture, life is hard enough as it is. [kid frowns as bully pushes his own hand in his face]

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