Balance sheet

In financial accounting, a balance sheet (also known as statement of financial position or statement of financial condition) is a summary of the financial balances of an individual or organization, whether it be a sole proprietorship, a business partnership, a corporation, a private limited company or other organization such as a government or not-for-profit entity. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year. A balance sheet is often described as a "snapshot of a company's financial condition".

Of the four basic financial statements, the balance sheet is the only statement that applies to a single point in time of a business's calendar year.

A standard company balance sheet typically lists assets, then liabilities, then owner's equity. Assets and liabilities themselves are typically listed in order of liquidity - "current" items with a maturity of less than one year, and "long-term" items with a maturity greater than one year. The difference between the assets and the liabilities is known as equity or the net assets or the net worth or capital of the company, and according to the accounting equation, net worth must equal assets minus liabilities.

A business can measure its profits by subtracting its expenses from its revenues. However, many businesses are not paid immediately; they build up inventories of goods and acquire buildings and equipment. In other words, businesses have assets, and so they cannot, even if they want to, immediately turn these into cash at the end of each period. Often, these businesses owe money to suppliers and to tax authorities, and the proprietors do not withdraw all their original capital and profits at the end of each period. In other words, businesses also have liabilities.