The Balance Sheet

The Balance Sheet, one type of financial condition statement, provides a summary of what company owns and what it owes on a particular day.

Assets represent everything of value that is owned by a business, 5 such as property, equipment, and accounts receivable. on the another hand, liabilities are the debts owed by a company-for example, to suppliers and banks. if liabilities are subtracted from assets, the amount remaining is the owners share of a business. this is known as owners or stockholders equity.


The balance sheet must follow the following formula:

Assets = Liabilities + Shareholders' Equity

It's called a balance sheet because the two sides balance out. This makes sense: a company has to pay for all the things it has (assets) by either borrowing money (liabilities) or getting it from shareholders (shareholders' equity).

Each of the three segments of the balance sheet will have many accounts within it that document the value of each. Accounts such as cash, inventory and property are on the asset side of the balance sheet, while on the liability side there are accounts such as accounts payable or long-term debt. The exact accounts on a balance sheet will differ by company and by industry, as there is no one set template that accurately accommodates for the differences between different types of businesses.