Here’s Why Knowing Balance Sheet Is a Prerequisite for an Accounting Student

Accounting is one of the key departments of any company and responsible for handling all the financial matters. It deals with the analysis, record keeping, summarizing, and evaluation of all the financial records. Owing to the sensitive nature of work involved in accounts, people working in this department are highly respected and have a significant impact on the business community. And this led to an increase in the number of enrollments for accounting studies. But when the accounting students are assigned various research papers, home tasks, and other writings, then they realize the real hardship. And, whenever they are given assignments on difficult topics, they choose to take accounting assignment help.

The reason for this is very simple, students are not aware of the crucial financial statements of accounts, which they directly or indirectly, have to use in every assignment they are given. And one of those financial statements is the balance sheet.

Every accounting student must have heard about the balance sheet. Students many times belittle the importance of the balance sheet in their studies. They need to understand if they want to pursue a career in finance or any related field, then knowing about the basics of the balance sheet is a must. To convince you more, we in this article will tell you the role of a balance sheet in a company. Let us first start with a simple and precise definition of a balance sheet.

What Is a Balance Sheet?

A balance sheet displays a company’s assets, liabilities, and shareholder’s equity. It is the true picture of a company’s net worth and provides a snapshot of what a company owns and what it owes.

The balance sheet adheres to an accounting equation which shows assets on one side and liabilities and equity on the other. The formula can be written as:

Assets = Liabilities + Equity

Now, you know exactly what a balance sheet is. And it’s time to know why a balance sheet is so important for a company and why every company makes it. Now, lets read the roles of a balance sheet.

Roles of the Balance Sheet

  • A balance sheet tells how much money a company has(assets), how much money it owes(liabilities), and what will be left when you evaluate both together(net worth).
  • A balance sheet also tells a company if it has enough working capital or not to sustain its operations.
  • It also tells that how much amount of loan company can take based on its current financial position.
  • It tells a company its ability to bear risks which basically means how serious the effect of an unexpected loss would be.
  • It is of great utility to external stakeholders, internal stakeholders, and potential stakeholders.
  • It can be used to determine different financial ratios which are used to analyze the company’s current and long term financial position.
  • It can also be used to compare the financial structure of the company for different years or with different competitors.
  • It is used as an anti-fraud tool for auditors. It tells them the exact amounts of different transactions which is difficult for internal stakeholders to change.
  • It tells the investors about the dividend’s position. A balance sheet shows the balance of retained earnings and by looking at it, the investor can determine if his dividend will come or not in case of any mishap.

Did you get the idea, how important a balance sheet is for a company as well as for an accounting student? Now don’t even think about skipping any lecture on the balance sheet.

I guess now you’re pretty convinced why your professor puts so much emphasis on balance sheets. The above article must have cleared your doubt that why every financial company puts “Knowledge of Balance Sheet” in their prerequisite list.

Summary: If you want to know why your university is asking you to prepare balance sheets repeatedly, then have a look at this article. This will tell as a finance student how important a balance sheet is for you and why you must know to prepare it.

Author’s Bio: Marie Claire was a financial adviser and is currently working as an assignment writer at Assignment Desk. She is helping students in their accounting and finance assignments for 3 years now. Apart from this, she’s also an angel investor.

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