What should balance on a balance sheet

Report assets as a debit except accumulated depreciation accounts that have credit balances. Examples of assets on a company's statement of financial position include:. The last four assets are known as fixed or long-term assets. They are expected to last longer than a year and can depreciate over time.

Depending on the complexity of your business, you may need classified balance sheets. In the case of a detailed balance sheet, accounts are grouped and presented by categories. The most common asset classifications, arranged by order of liquidity, are:. Total liabilities are usually reported as credit balances. When creating a classified balance sheet, liability accounts are organized as short-term or long-term debt in order of appearance :.

Long-term liabilities include capital leases, deferred compensation, and bank loans with a term of more than one year. Equity is equal to assets minus liabilities and is the amount of owner capital invested in the firm. Owner's equity relates to businesses that are a sole proprietorship, and Stockholders' equity refers to corporations.

Three typical stockholder equity accounts are:. Review the above balance sheet example from Apple, Inc. Now that you understand how the equation works with simple numerical examples, consider a real world example. The assets section of this equation includes both current and long-term assets.

It also helps you, as well as others, understand your own financial operation in a deeper and more organized way.

This includes your income statement and cash flow statement. It also helps you with:. This means you know that errors can occur easily and frequently when dealing with numbers. Your balance sheet will be no exception. Potential issues can arise depending on how you tallied your information and what information you chose to include. When this happens, it may be due to:. Measure ad performance. Select basic ads. Create a personalised ads profile. Select personalised ads.

Apply market research to generate audience insights. Measure content performance. Develop and improve products. List of Partners vendors. Your Money. Personal Finance. Your Practice. Popular Courses. Article Sources. Investopedia requires writers to use primary sources to support their work.

These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate.

You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy. Compare Accounts. The offers that appear in this table are from partnerships from which Investopedia receives compensation.

It must mean there is at least one line on the Balance Sheet that is moving period to period without a corresponding Cash Flow Statement change or an offsetting Balance Sheet change. These three steps will work every time, as they ensure that the Cash Flow Statement and Balance Sheet are connected properly.

Good luck!