Liabilities & Equity
Debt, payables, and the accounting equation
The right side of the balance sheet shows where the money came from to acquire the assets — borrowed (liabilities) or contributed and earned (equity). Reading it answers a different question than the asset side: not 'what does the company have?' but 'who has a claim on it, and at what priority?
' Bondholders get paid before stockholders. Suppliers get paid before bondholders if the company files for bankruptcy. Equity holders are last in line, with the largest upside if the business succeeds and the most exposure if it fails.
The capital structure is the architecture of those claims. The accounting equation that anchors the entire balance sheet: Assets = Liabilities + Equity. Always.
Every transaction preserves the equation. Borrow $10 million? Cash (asset) up $10M, debt (liability) up $10M.
Earn $5M of profit? Assets up $5M, retained earnings (equity) up $5M.
That is the opening. Finishing a lesson is where it stops being interesting and starts being useful: the full lesson runs to 6 sections and ends with 4 practice questions. A free account is what opens the rest, and the other 255 lessons in the Academy with it. No card.
What this lesson covers
- 1Current liabilities — what's due in the next 12 months
- 2Non-current liabilities — long-term obligations and structural debt
- 3Leverage ratios — three views of debt
- 4Apple's balance-sheet right side — FY2024
- 5Where to see this on the platform
- 6Summary