Balance Sheet
Also called: statement of financial position
What is Balance Sheet?
A balance sheet is a snapshot on one date of what a business owns, what it owes and what belongs to the owners. Assets always equal liabilities plus equity, which is where the name comes from.
Why Balance Sheet matters
The P&L shows performance over a period; the balance sheet shows condition at a moment. Lenders read it first, because it reveals debt, working capital and how much of the business is genuinely owned.
Balance Sheet formula
Assets = Liabilities + Equity
Any imbalance means the underlying entries are incomplete.
How Balance Sheet works in practice
Read it as a whole. Rising stock and receivables alongside a shrinking bank balance tells the story of a profitable business quietly running out of cash.
Frequently asked questions
The balance sheet is a position on a date; the P&L covers a period of trading.