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Balance sheet

In formal bookkeeping and accounting, a balance sheet is a statement of the financial value (or "worth") of a business or other organisation (or person) at a particular date, usually at the end of its "fiscal year," as distinct from a profit and loss statement (or "P&L"), which records income and expenditures over some period. Therefore a balance sheet is often described as a "snapshot" of the company's financial condition at that time.

The balance sheet has two parts: assets on the left-hand ("debit") side or at the top and liabilities on the right-hand ("credit") side or at the bottom. The assets of the company -- money ("in hand" or owed to it), investments (including securities and real estate), and other property -- are equal to the claims for payments of the persons or organisations owed -- the creditors, lenders, and shareholders. This standard format for balance sheets is derived from the principle of double-entry bookeeping[?].

According to the basic accounting equation:

assets = liabilities + equity

therefore,

assets - liabilities = equity.

Equity, which is the shareholders' interest (= "net worth[?]"), may not reflect the company's true value, since assets are normally shown (= "carried") on the balance sheet at what the company paid for them, without any adjustment for increases or decreases[?] in their value since then.

see also other financial statements



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