Balance Sheet

The "Assets" side of the balance sheet is arranged in order of "liquidity." Those assets that are quickly convertible to cash are listed first. Going down the sheet, the assets become less and less liquid. Similarly, the "Liabilities" side of the balance sheet is arranged in order of liquidity - those liabilities that must be paid promptly are listed first. Longer term liabilities are listed below. Finally, after all liabilities, the Stockholders' Equity section is listed, termed "Net Worth." A way of visualizing the balance sheet is that all "Assets" of the company can be claimed by the creditors and the shareholders of the company. The amounts claimed by the creditors are listed as liabilities. The amounts claimed by the shareholders are listed under Stockholders' Equity (Net Worth). Below is a sample balance sheet for ABC corporation:

Notice that the balance sheet "balances" - Total Assets of $12,000,000 equals Total Liabilities and Stockholders' Equity of $12,000,000. The first items listed on both the asset and the liability sides are current, showing they will turn into cash within one year. The next section examines the "current" portion of the balance sheet.