Balance sheet

Balance Sheet

A Balance Sheet (pronunciation: /ˈbaləns ʃiːt/) is a financial statement that reports a company's assets, liabilities, and shareholders' equity at a specific point in time. It provides a basis for computing rates of return and evaluating the capital structure of the company.

Etymology

The term "Balance Sheet" is derived from the fact that the financial structure of a company is typically balanced, meaning that Assets equal the sum of Liabilities and Shareholders' Equity.

Definition

A Balance Sheet is a snapshot of a company's financial condition at a specific moment in time, usually at the close of an accounting period. It comprises of three main components: assets, liabilities, and shareholders' equity.

Assets are what a company owns that have value. This typically means they can either be sold or used by the company to make products or provide services that can be sold. Assets include physical property, such as plants, trucks, equipment and inventory. It also includes things that can't be touched but nevertheless exist and have value, such as trademarks and patents.

Liabilities are amounts of money that a company owes to others. This can include everything from loans, to unpaid bills, to money owed to suppliers. It also includes obligations to provide goods or services to customers in the future.

Shareholders' Equity is sometimes called capital or net worth. It's the money that would be left if a company sold all of its assets and paid off all of its liabilities. This leftover money belongs to the shareholders, or the owners, of the company.

Related Terms

Income Statement - Another important financial statement that provides information about a company's profitability over a period of time.

Cash Flow Statement - A financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents.

Financial Statement - A written report which quantitatively describes the financial health of a company. It includes balance sheet, income statement, and cash flow statement.