What is a balance sheet?

A balance sheet is a financial statement that shows a company’s financial position at a specific point in time. It is divided into three main sections: assets, liabilities, and equity. Assets represent what the company owns, such as cash, accounts receivable, inventory, and property. Liabilities are what the company owes, including loans, accounts payable, and other debts. Equity represents the owners’ interest in the company after liabilities are subtracted from assets. The balance sheet follows the accounting equation: Assets = Liabilities + Equity. It helps stakeholders understand the company’s resources, obligations, and net worth, providing insights into financial health, liquidity, and capital structure. Investors, creditors, and management use it for decision-making and performance evaluation.