Are you confused when someone talks about assets, equity, or liabilities?
It’s common to feel completely confused when you try to read a company’s financial statement for the first time. Terms like off-balance sheet items retained earnings, and deferred liabilities often sound like another language.
Yet, understanding these balance sheet items is essential, whether you’re a business owner, a finance student, or preparing for a financial management course.
People often find financial terms confusing, which prevents them from judging a business successfully or deciding on good investments.
What Is a Balance Sheet?
Out of the three key financial statements, the balance sheet is one. It outlines the company’s finances at exactly that moment.
Ownership may rest with a sole trader, a partnership, a private limited company, a corporation, government bodies, or not-for-profits. No matter the business form, a balance sheet states what the owners possess, what they are responsible for, and what’s left over for them.
In financial accounting, a balance sheet, also called a statement of financial position, provides a view of someone’s or an organisation’s financial situation on a given date. Whatever the setup, the balance sheet sums up what’s owned, what’s owed, and what’s left over for the owners.
The key formula it follows is:
Assets = Liabilities + Equity
Each part of this equation plays a distinct role. Now let’s go into the balance sheet items list, starting with what companies own: Assets.
How Balance Sheets Work?
The balance sheet explains the financial status of a company at one given time. In itself, it does not show the big, ongoing trends we are generally interested in. That’s the reason analysts often match it to balance sheets from previous years.
Determining a company’s financial health usually involves the use of ratios from account statements, such as the debt-to-equity ratio or the acid-test ratio. They also check the income statement and cash flow statement to see the full picture.
References to the balance sheet in the notes section make it easier to judge the company’s general financial health. A company’s balance sheet will show assets, liabilities, and shareholders’ equity as its main sections. They are not only numbers, they give us evidence of a story.
You know it as the balance sheet because what your company owns always has to add up to the total of its debts and investments. Each of these categories comprises smaller accounts that vary from one industry to another. For example, ‘inventory’ means one thing to a tech firm and something entirely different to a car manufacturer.
Some companies even use a variation called a common-size balance sheet.
India’s central bank balance sheet rose to ₹38,597.93 billion in March 2025, up from ₹36,182.25 billion in February. Since 2001, the average balance sheet size has stood at around ₹13,775.44 billion.
Understanding Assets: What Your Business Owns
Assets are anything a company owns that has value. These help generate income, and you can sell them if needed.
1. Current Assets
These are short-term and expected to get used up or converted to cash within a year:
- Cash and cash equivalents
- Accounts receivable
- Inventory
2. Non-current Assets
Also called fixed or long-term assets, these include:
- Property, plant, and equipment
- Patents or trademarks
- Long-term investments
Understanding these items helps assess a company’s liquidity, its ability to pay off short-term obligations.
Liabilities: What Your Business Owes
Liabilities are obligations that the company settles, either now or in the future.
1. Current Liabilities
- Accounts payable
- Salaries payable
- Short-term loans
2. Non-current Liabilities
- Bonds payable
- Long-term lease obligations
- Deferred tax liabilities
When studying the balance sheet items list these reveal a company’s debt position. It shows how much the business depends on outside funding.
Equity: The Owner’s Claim
Equity represents the owners’ share of the business after all liabilities have been paid.
Common equity components:
- Share capital (amount invested by owners)
- Retained earnings (profit not paid out as dividends)
- Reserves (general, capital, or revaluation reserves)
Equity is critical in evaluating company stability and long-term value.
Off-Balance Sheet Items: What’s Hidden?
Some transactions aren’t recorded directly on the balance sheet but can still affect a company’s financial condition. These are off-balance sheet items.
Off-balance sheet items examples:
| Category | Example | Impact |
|---|---|---|
| Operating Leases | Office leases not capitalised | Hides liabilities, lower debt ratios |
| Joint Ventures | Not fully consolidated | Understates assets and liabilities |
| Factoring Receivables | Selling invoices for upfront cash | Reduces reported receivables |
These items don’t appear in the standard balance sheet items list but are critical for advanced analysis.
Why Balance Sheet Items Matter in Financial Management Courses
In a good financial management course, one of the first things taught is how to interpret a balance sheet. That’s because every strategic decision from raising funds to expanding operations, depends on these figures.
You’ll learn to:
- Analyse liquidity and solvency
- Evaluate working capital efficiency
- Spot financial red flags early
Real-World Case Application
Let’s say Company A has ₹50 lakhs in assets, ₹30 lakhs in liabilities, and ₹20 lakhs in equity. It looks stable at first. But when you factor in off-balance sheet lease obligations worth ₹10 lakhs, the risk becomes clearer.
This kind of analysis looking beyond the surface is exactly what financial analysts do every day. It’s also what courses like the Financial Analysis Prodegree by Imarticus Learning and KPMG help you master.
Assets don’t exist in a vacuum. They’re often purchased through liabilities. Likewise, equity grows only when assets increase, or liabilities reduce. If these elements aren’t understood in relation, your analysis is incomplete.
For example:
- If current liabilities > current assets → liquidity problem
- If debt > equity → financial instability
- If equity = 0 → technically insolvent
This chain reaction is what makes the balance sheet a powerful tool in financial storytelling.
Break Into High-Finance Roles with Imarticus Learning & KPMG’s Course
Imarticus Learning Financial Analysis Prodegree, created with KPMG India, teaches you everything about balance sheet analysis, reporting, and forecasting. It’s a 140-hour, weekend course delivered live online by industry experts.
This course doesn’t just offer theory. You’ll engage directly with seasoned KPMG professionals in hands-on workshops that focus on application, not just concepts. You’ll explore the changing face of financial analysis through sessions on AI, automation, and data-driven decision-making.
Throughout the course, industry practitioners guide you. You’ll work on real-world assignments, take part in group presentations, and analyse case studies drawn from actual business challenges.
The programme also provides a certification jointly backed by Imarticus Learning and KPMG, giving you an edge in the job market. From resume-building to interview prep, you’ll receive full career support tailored to the finance sector.
Whether you’re switching careers or strengthening your foundation, the Financial Analysis Prodegree gives you the tools and training to succeed in modern finance.
FAQ
Q1. What are the three main balance sheet items?
Assets, liabilities, and equity make up the key balance sheet items.
Q2. Can off-balance sheet items affect my analysis?
Yes, off-balance sheet items, such as operating leases, can hide risk.
Q3. How can I remember the balance sheet items list easily?
Think of it as what you own (assets), owe (liabilities), and retain (equity).
Q4. Which financial management course covers balance sheets?
The Financial Analysis Prodegree by Imarticus Learning covers it in-depth.
Q5. Why is understanding balance sheet items important?
It helps assess a company’s health, liquidity, and investment potential.Q6. Where can I apply this knowledge?
In roles across investment banking, financial planning, and corporate strategy.