What is a Balance Sheet?

A balance sheet also known as the statement of financial position tells about the assets, liabilities and equity of a business at a specific point of time. It is a snapshot of a business. A balance sheet is an extended form of the accounting equation.

A balance sheet is a financial statement that summarizes a company’s assets, liabilities and shareholders’ equity at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by owners

An accounting equation is: Assets = Liabilities + Equity.

What are the accounts in the balance sheet?

A small business balance sheet lists current assets such as cash, accounts receivable, and inventory, fixed assets such as land, buildings, and equipment, intangible assets such as patents, and liabilities such as accounts payable, accrued expenses, and long-term debts.

Why does a balance sheet need to be balanced?

A balance sheet should always balance. The name “balance sheet” is based on the fact that assets will equal liabilities and equity every time. The assets on the balance sheet consist of things of value that the company owns or will receive in the future and which are measurable.

What is capital on the balance sheet?

The Balance Sheet is a hugely important report and is divided into three main segments – assets (often divided into current assets and fixed assets), liabilities (monetary obligations of the company), and shareholder equity or retained earnings (known as capital).

What does a balance sheet look like?

In it’s simplest form a balanace sheet looks like this (wil a lot more entries)

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Sample of a full Balance Sheet

Below is an example of a balance sheet, circa 2016 of Walmart: