Question

What are some components of a balance sheet? Why is your net worth important for you to know?

Answer 1

Components of a Balance Sheet are:

1. Assets (A)

2. Liabilities (L)

3. Shareholder's equity (E)

A = L + E

Assets (A): The resources controlled by the company as a result of past events and from which future economic benefits are expected to flow to the entity.

Liabilities (L): The obligations of a company arising from past events, the settlement of which is expected to result in an outflow of economic benefits from the entity.

Equity (E): The owners’ interest in the company’s assets after deducting its liabilities. Commonly known as shareholders’ equity or owners’ equity.

Your net worth, also known as shareholder's equity is the amount by which your assets exceed your liabilities. Conversely, if your liabilities are greater than your assets, you have a negative net worth. Your net worth provides a snapshot of your financial situation at a point in time.

answered by: anonymous