What is a Balance Sheet?

A Balance Sheet is a financial statement of any company or is the summary of its assets and liabilities, equity capital, total debt, etc. at a specific point in time. It reflects the financial health of a firm and gives appropriate knowledge to the investors about what is owned and owed by the firm along with the amount which is invested by the shareholders.

It derives its name from the fact that assets and liabilities of the firm which are put on two heads of the sheet must balance out.Assets include various resources or things owned by the company and are divided into current and long-term. Liabilities are debts or obligations of the company and stand for the amount owed by it to its creditors. They are also divided into current and long-term liabilities. Furthermore, the equity capital of the owner is another important feature of the balance sheet. Total liabilities and owners’ equity must always add up to the total assets. It is also called book value of the company.

 

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