The balance sheet is a financial statement that provides a snapshot of an organization’s financial position at a specific point in time. It provides information on an organization’s assets, liabilities, and equity. The balance sheet follows the accounting equation, which states that assets equal liabilities plus equity. This means that the total assets of an organization must equal the total liabilities and equity.
The balance sheet is divided into two main sections: the assets section and the liabilities and equity section. The assets section lists all the resources that an organization owns, such as cash, investments, property, and equipment. The liabilities and equity section lists all the claims against those resources, such as loans, accounts payable, and shareholder equity. By comparing the assets and liabilities and equity sections of the balance sheet, an organization can determine its net worth or its book value. The balance sheet is an important tool for investors, creditors, and other stakeholders to assess an organization’s financial health and performance.