Course · Act II: The Three Statements · Chapter 7
How to read a balance sheet
A real company’s balance sheet: current vs. non-current items, retained earnings, and why most assets are carried at historical cost.
Key terms
- Current
- Within one year. Applies to both assets and liabilities.
- Retained earnings
- All past net income kept in the business (not paid as dividends).
- Historical cost
- Most assets are recorded at what they cost, less depreciation, not at market value.
“The Balance Sheet, Properly” is part of the full course: 5 puzzles on how to read a balance sheet, with a story that carries through all five acts. Try this act’s free chapter, “The Income Statement”, first.