The Balance Sheet

The balance sheet shows the organization’s financial position at a specific point in time, typically at the end of the accounting period. It presents the organization’s assets, liabilities, and net assets (in a not-for-profit organization) or owner’s/stockholder’s equity (in a for-profit organization).[1]

The Accounting Equation is as follows:

  • Assets = Liabilities + Net Assets (in a not-for-profit organization)
  • Assets = Liabilities + Owner’s Equity (in a for-profit organization)
Term Definition Section Info
Accounts Payable Value of goods or services purchased that will be paid for at a later date Included in current liabilities
Accrued Expense Expense incurred in a period but not yet recorded, and no money has been paid Included in current liabilities
Bad Debt Uncollectible amounts from customer accounts Included in current assets
Charity Care Consists of money due to the organization by patients and third parties Included in current assets
Common Stock Corporation's primary class of stock issued, with each share representing a partial claim to ownership or a share of the company's business Included in shareholder's equity
Current Asset Asset that will be used or consumed in one year or less Includes cash, temporary investments, net accounts receivables, net of contractual allowances, charity care, bad debt, inventory, and prepaid expenses
Current Liability Debt or obligation due within one year Includes accounts payable, noted payable, accrued expenses payable, deferred revenue, estimated third-party adjustments, and current portion of long-term debt
Current Portion of Long-Term Debt Current amount of the organization's long-term debt Included in current liabilities
Deferred Revenue Money received but not yet earned by the organization Included in current liabilities
Dividend Portion of the net worth (equity) that is returned to owners of a corporation as a reward for their investment Included in shareholder's equity
Estimated Third-Party Adjustments Approximations of how much money the organization will be required to return to third-parties due to over-payments to the organizations Included in current liabilities
Explanatory Notes Last section of the Balance Sheet which includes specific notes on transactions that took place at the point of time of reporting
Inventory Value of products to be sold or items to be converted into sellable products Included in current assets
Liability Probable future sacrifice or economic benefits arising from present obligations or past transactions Two types: current and long term
Long-Term Debt, Net of Current Portion Debt that is due in more than one year minus the amount that is due in one year Included in long-term liabilities
Long-Term Investment Stocks, bonds, or other types of investments held for more than one operating cycle or one year, whichever is longer Included in non-current assets
Long-Term Liability Debt settled outside one year or one operating cycle, whichever is longer Includes long-term debt and net of current portion
Net Accounts Receivable Consists of money due to the organization by patients and third parties Included in current assets
Net Assets Difference between assets and liabilities in a not-for-profit organization which represents the owner's interest and other financial interests
Net of Contractual Allowances Consists of money due to the organization by patients and third parties Included in current assets
Net Plant, Property, and Equipment Land, buildings, and equipment minus the depreciation accumulated over time Included in non-current assets
Noncurrent Asset Asset that will be used or consumed over more than a year Includes net plant, property, equipment, long-term investments, and other assets
Notes Payable Value of amounts borrowed that will be paid in the future with interest Included in current liabilities
Other Noncurrent Asset Assets limited to use by contracts with outside parties and goodwill Included in non-current assets
Permanently Restricted Net Assets Includes donor-restricted net assets with restrictions that never expire, such as endowment funds
Prepaid Expenses Expenditures for goods and services not yet used or consumed, such as rent and insurance premiums Included in current assets
Retained Earnings Cumulative, undistributed net income or net loss for the business since its inception Included in shareholder's equity
Stockholders' Equity Owner or stockholders' investments in the business and earnings Also called shareholder's equity, owner's equity, or retained earnings
Temporarily Restricted Net Assets Includes donor-restricted net assets that the organization can use for the donor's specific purpose after meeting the donor's restriction, such as the passage of time or an action by the organization
Temporary Investment Investments that are expected to be sold within a year Included in current assets
Unrestricted Net Assets Includes net assets that have not been restricted by donors or granters, such as the excess of revenues to expenses from operations

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  1. Nowicki, M. (2017). Introduction to the financial management of healthcare organizations (7th ed.). Health Administration Press.


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