Balance sheet

Written by Fmi.Online Friday January 6, 2023
A balance sheet is one of four basic accounting financial statements  The other three being the income statement, state of owner’s equity, and statement of cash flows.

Explanation: 

The balance sheet uses the accounting equation (assets = liabilities  + owner’s equity) to show a financial picture of the business on a specific day. In other words, a balance sheet lists all of the assets that a company owns as well as the debts owed by the company and the owner’s interest or ownership share in the company.

In a nutshell: 

  • It’s a snapshot of all the assets, liabilities, and equity that the company owns on that specific day.
  •  It’s like a photo taken on that day in the life of the company. 
  • The balance sheet changes everyday that new transactions are posted, so every day’s picture will be a little different.
  • Just like looking through an old family photo book, looking at old balance sheets gives you a history of what the company looked like back on those dates.
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