What is Balance Sheet?
Definition
A balance sheet is a financial statement that shows a business's assets, liabilities, and equity at a specific point in time, following the equation: Assets = Liabilities + Equity.
Explained Simply
Unlike the income statement (which covers a period), the balance sheet is a snapshot of a single date. Assets are divided into current (cash, receivables, inventory) and non-current (property, equipment, intangibles). Liabilities are similarly split into current (payable within 12 months) and non-current (long-term loans). Equity includes share capital, retained earnings, and reserves. The balance sheet must always balance — if it doesn't, there's an accounting error.
Related Terms
Income Statement
An income statement (also called a profit and loss statement) is a financial report that shows a business's revenues, expenses, and resulting profit or loss over a specific period.
Cash Flow Statement
A cash flow statement is a financial report that tracks the actual movement of cash in and out of a business over a period, categorised into operating, investing, and financing activities.
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