Balance Sheet

Balance Sheet (Definition)

A balance sheet is a financial statement that provides a snapshot of a companys financial position at a specific point in time. It shows the companys assets, liabilities, and shareholders equity.

Key components and aspects of a balance sheet include:

1. Assets: Resources owned by the company (e.g., cash, inventory, property)
2. Liabilities: Debts and obligations owed by the company (e.g., loans, accounts payable)
3. Shareholders Equity: The residual interest in the assets after deducting liabilities
4. Must always balance: Assets = Liabilities + Shareholders Equity
5. Typically prepared at the end of a reporting period (e.g., monthly, quarterly, annually)
6. Used to assess a companys financial health and liquidity
7. Provides information for calculating important financial ratios

The balance sheet is one of the three main financial statements, along with the income statement and cash flow statement, used to evaluate a companys financial performance and position.