Balance Sheet

What is a Balance Sheet?

The balance sheet is one of the three fundamental financial statements used by accountants, business owners, investors, lenders, and other stakeholders. The other main financial statements are the statement of income and the statement of cash flows.

A balance sheet is also called a “statement of net worth” or “statement of financial position.”

The balance sheet is the snapshot of a company’s financial position at a given time, typically measured monthly, quarterly, semi-annually, or annually.

The balance sheet shows the total assets and total liabilities and is considered the last step in preparing final accounts.

Balance Sheet definition

A summarised financial statement contains assets, liabilities, equity, total debt, and profit/loss.

The assets and liabilities are divided into the short and long term. The difference between assets and liabilities is the net worth of the business.

The basic equation which is used for the balance sheet is:

Owner’s Equity = Assets – Liabilities

Components of a Balance Sheet