Balance Sheet
A financial statement showing a company's assets, liabilities, and shareholders' equity at a specific point in time.
Also: statement of financial position
Definition
A balance sheet is a financial statement that provides a snapshot of a company's financial position at a specific moment in time. It follows the fundamental accounting equation: Assets = Liabilities + Shareholders' Equity. Assets are what the company owns (cash, receivables, inventory, property); liabilities are what it owes (loans, accounts payable, deferred revenue); equity is the residual interest of shareholders. The balance sheet is one of the three core financial statements, alongside the income statement and cash flow statement.
Example
“Apple's balance sheet shows total assets of $350 billion, liabilities of $290 billion, and shareholders' equity of $60 billion, illustrating the company's financial structure at year-end.”
Usage Examples
- 1
“The auditors flagged that off-balance-sheet liabilities could significantly alter the company's apparent financial health.”
- 2
“After the acquisition, the combined entity's balance sheet showed total assets of ₹12,500 crore.”
When & How to Use
Use when analysing a company's financial position at a specific point in time — what it owns (assets), what it owes (liabilities), and what belongs to shareholders (equity).
- ▸A bank conducting due diligence before extending a working capital loan
- ▸An analyst calculating the debt-to-equity ratio for a credit rating
- ▸An investor checking net tangible assets before buying shares in a company
Etymology & Origin
From 'balance' (Old French 'balance', from Latin 'bilanx' — two-panned scale) + 'sheet' (a flat document). Implies assets must equal liabilities plus equity — hence 'balance'.
History & Evolution
Double-entry bookkeeping, which underlies the balance sheet, was first systematically described by Luca Pacioli in 1494. The modern standardised balance sheet format was established by the Companies Acts in the UK (1844) and later harmonised through International Accounting Standards (IAS 1).
Synonyms
- statement of financial position
- financial snapshot
- net worth statement
Images
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Related Terms
- income-statement
- cash-flow-statement
- equity
- liabilities