Balance Sheet Terminology

In this post, I outline some common balance sheet terminology.

What is a Balance Sheet?

A balance sheet (un balance) is one of the most important financial statements used by an accountant or a business. It can be described as a snapshot of a company’s financial situation in a given moment.

A balance sheet is divided into two parts. These two parts must balance each other out or equal each other. The main formula of a balance sheet is always the same:

Assets = Liabilities + Shareholders’ Equity

Or in Spanish

Activo = Pasivo + Patrimonio

Let’s look at what these different terms mean.

Assets (activo). An asset is something  that generates  profit for a company. A current asset (activo circulante) is
an asset that has a lifespan of a year or less and can be easily converted into cash. The most famous example of a current asset would be cash (efectivo).  

A non-current asset activo fijo is an asset that is not turned into cash easily and/or has a lifespan of more than a year.

Non-current assets can be tangible (tangible),
for example computers, machinery or a building or intangible (intangible), for example software or know-how.

 

Liabilities (pasivo). Liabilities are the debts owed by a business. They can be divided into current liabilities (pasivo a corto), which are debts that have to be paid back within a year and non-current liabilities (pasivo a largo), which are debts that don’t have to be paid back immediately.

Working capital (fonda de maniobra). Working capital is the capital available to a company for daily operations at a given moment in time. It is a company’s current assets minus its current liabilities.

Here is a sample balance sheet which shows these concepts clearly.

 

GLOBAL CONSULTANTING
BALANCE SHEET as at 7^th December 2019

Below are some of the terms found in the balance sheet and their translation.

 

Accounts payable = Cuentas a pagar

Accounts receivable = Cuentas a cobrar

Accrued wages = Salarios devengados

Cash = Efectivo

Computer equipment = Equipamiento informático

Furniture & Fitout = Mobiliario y equipo

Income tax = Impuesto de sociedades

Interest payable = Interés a pagar

Inventory = Existencias

Leasehold = Alquiler

Loans = Préstamos

Petty cash = Efectivo para gastos menores

Prepaid expenses = Gastos pagados por anticipado

Renovations/improvements = Mantenimiento y reparaciones

 

 

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