The financial statement that has three segments which, when analyzed together, provide an idea of what a company owns and what it owes is the balance sheet. The balance sheet is divided into three main sections:
- Assets: What the company owns, including current assets (cash, accounts receivable, inventory) and long-term assets (property, equipment, intangible assets)
- Liabilities: What the company owes, including current liabilities (debts due within one year) and long-term liabilities (debts due after one year)
- Owners' Equity (Shareholders' Equity): The residual interest in the assets after deducting liabilities; it represents the owners' claim on the company
These three segments together give a snapshot of the company’s financial position at a specific point in time, showing the relationship expressed by the fundamental accounting equation:
Assets=Liabilities+Owners’ Equity\text{Assets}=\text{Liabilities}+\text{Owners' Equity}Assets=Liabilities+Owners’ Equity
This means the resources owned by the company are financed either by borrowing (liabilities) or by the owners' investments (equity)
. In summary, the balance sheet is the financial statement with three segments-assets, liabilities, and owners' equity-that together reveal what a company owns and what it owes
