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