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Balance sheet example 

By Lona Matshingana 

2025/12/27

A balance sheet is a financial snapshot of a company at a specific point in time. It follows the fundamental accounting equation:

This means everything a company owns (Assets) must be balanced by how it paid for those things—either through debt (Liabilities) or investments/earnings (Equity).

The Example Scenario
Imagine a small startup called "Bright Coffee Co." on December 31, 2024.
 * They have $10,000 in the bank.
 * Customers owe them $2,000 for catering orders.
 * They have $3,000 worth of coffee beans in stock.
 * They own a professional espresso machine worth $15,000.
 * They owe suppliers $4,000.
 * They have a bank loan of $10,000.
 * The owner originally invested $12,000, and the company has kept $4,000 in profits.

The Answer: Bright Coffee Co. Balance Sheet
As of December 31, 2024

| Assets | Amount |
|---|---|
| Current Assets | |
| Cash | $10,000 |
| Accounts Receivable | $2,000 |
| Inventory | $3,000 |
| Fixed Assets | |
| Equipment | $15,000 |
| Total Assets (A) | $30,000 |

| Liabilities & Equity | Amount |
|---|---|
| Liabilities | |
| Accounts Payable | $4,000 |
| Bank Loan | $10,000 |
| Total Liabilities (L) | $14,000 |
| | |
| Owner’s Equity | |
| Common Stock (Initial Investment) | $12,000 |
| Retained Earnings (Profit) | $4,000 |
| Total Equity (E) | $16,000 |
| | |
| Total Liabilities & Equity (L + E) | $30,000 |

Why this works:
If you look at the totals, the equation is satisfied:

Key Takeaways:
 * Current Assets: Things that can be turned into cash within a year (Cash, Inventory).
 * Fixed Assets: Long-term physical property (Equipment).
 * Liabilities: Money the company owes to outside parties.
 * Equity: The "book value" of the company that belongs to the owners.

Thank you for reading!!! 

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