Balance sheet accounts

What are Balance Sheet Accounts?

Balance sheet accounts are used to create the balance sheet report. A balance sheet account can be classified as either an asset, liability, or equity account. These accounts are not flushed out at the end of a reporting year; instead, they carry balances forward from year to year. Given this characteristic, balance sheet accounts are known as permanent accounts. The following are examples of balance sheet accounts:

Asset Accounts

Balance sheet asset accounts include all short-term and long-term assets. Short-term assets typically include cash, marketable securities, accounts receivable, and inventory. Long-term assets are mainly comprised of fixed assets. The chief asset accounts found on the balance sheet are as follows:

• Cash

• Marketable securities

• Accounts receivable

• Inventory

• Fixed assets

• Other assets

Related AccountingTools Course

The Balance Sheet

Liability Accounts

Balance sheet liability accounts include all short-term and long-term liabilities. Short-term liabilities include accounts payable, accrued expenses, taxes payable, pension payable, and short-term debt. Long-term liabilities are mainly comprised of long-term debt. The chief liability accounts found on the balance sheet are as follows:

• Accounts payable

• Accrued expenses

• Taxes payable

• Pension payable

• Short-term debt

• Long-term debt

• Other liabilities

Equity Accounts

Balance sheet equity accounts include stock, additional paid-in capital, and retained earnings. The chief equity accounts found on the balance sheet are as follows:

• Common stock. This is an ownership share in a corporation. The holders of common stock have voting rights at shareholder meetings and the opportunity to receive dividends.

• Preferred stock. Preferred stock is a class of equity ownership that has a more senior claim on the earnings and assets of a business than common stock. In the event of liquidation, the holders of preferred stock must be paid off before common stockholders, but after secured debt holders.

• Additional paid-in capital. Additional paid-in capital is any payment received from investors for stock that exceeds the par value of the stock. The concept applies to payments received for either common stock or preferred stock. Par value is typically set extremely low, so most of the amount paid by investors for stock will be recorded as additional paid-in capital.

• Retained earnings. Retained earnings are the profits that a company has earned to date, less any dividends or other distributions paid to investors.

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