The Balance Sheet

What this video covers

• The accounting equation (Assets = Liabilities + Shareholders' Equity) and why assets are listed in order of liquidity
• What "current" means on a balance sheet: convertible to cash or payable within exactly one year
• How total capitalization is calculated (long-term debt plus preferred stock plus common equity) and why current liabilities are excluded
• Straight-line vs. accelerated depreciation under the Modified Accelerated Cost Recovery System (MACRS), and why land is never depreciated
• Why depreciation and depletion are non-cash charges, and how Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) adds depreciation back
• How First In, First Out (FIFO) and Last In, First Out (LIFO) hit Cost of Goods Sold (COGS), net income, and taxes during rising prices
• Why LIFO is allowed under U.S. Generally Accepted Accounting Principles (GAAP) but banned under International Financial Reporting Standards (IFRS)