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The Balance Sheet |
| What You need to know |
Components of the Balance Sheet |
Importance of Balance Sheet Components | Call Reports | For Your Reference |
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As the name implies, a balance sheet is a list of asset, liability and equity balances. The totals for these balances satisfy the balance sheet identity: assets = liabilities + net worth (see the table below). Using this identity, the reader can tell at a glance that the resources of this bank, or assets, equal $100,000 and that these assets are being funded by two sources: $90,000 by the creditors (liabilities) and $10,000 by the shareholders (owners' equity). Move your mouse pointer over the chart below. Click on any area highlighted with a red box to read more information about the elements of a Balance Sheet. Off-balance-sheet items are also known as contingent liabilities because the transaction is not complete until certain conditions or requirements are met. These transactions include loan commitments, futures and forward contracts and letters of credit. It is critical to review these items because they represent potential credit risk, that is the risk that the counter party or the other side of the transaction won’t honor their obligation and/or a liquidity risk, the inability to fund unexpected draws on lines of credit. Back to top |
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