Balance sheet

An orderly account of the assets of a company or individual and of the financial claims on those assets by others.

Balance Sheet

A financial statement that summarizes a company's assets, liabilities and shareholders' equity at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by the shareholders.

The balance sheet must follow the following formula:
Assets = Liabilities + Shareholders' Equity

Each of the three segments of the balance sheet will have many accounts within it that document the value of each. Accounts such as cash, inventory and property are on the asset side of the balance sheet, while on the liability side there are accounts such as accounts payable or long-term debt. The exact accounts on a balance sheet will differ by company and by industry, as there is no one set template that accurately accommodates for the differences between different types of businesses.

Investopedia Commentary

It's called a balance sheet because the two sides balance out. This makes sense: a company has to pay for all the things it has (assets) by either borrowing money (liabilities) or getting it from shareholders (shareholders' equity).

The balance sheet is one of the most important pieces of financial information issued by a company. It is a snapshot that shows you what a company owns and owes at that point in time. The income statement, on the other hand, shows how much revenue and profit a company has generated over a period of time. Neither statement is better than the other rather, the financial statements are built to be used together to present a complete picture of a company's finances.

Related Links

Reading The Balance Sheet
Introduction to Fundamental Analysis
Advanced Financial Statement Analysis

See also: Accounts Payable - AP, Asset, Clean Balance Sheet, Fundamental Analysis, Income Statement, Inventory, Liability, Other Current Assets, Other Long-Term Liabilities, Shareholders' Equity

balance sheet

The financial statement of a business or institution that lists the assets, debts, and owners' investment as of a specific date. Assets are ordered according to how soon they will be converted into cash, and debts according to how soon they must be paid. Because balance sheets do not list items at their current monetary value, they may greatly overstate or understate the real value of certain corporate assets and liabilities. Also called statement of financial condition, statement of financial position. See also consolidated balance sheet.