Balance Sheet

A list of all we own and all we owe.

Source: click here.

A balance sheet is a financial statement presenting an entity’s financial position at a specific point in time. It lists assets (resources owned or controlled), liabilities (obligations to external parties), and equity (ownership interest). The balance sheet follows the accounting equation: Assets = Liabilities + Equity. It provides insights into an entity's liquidity, solvency, and financial flexibility.


Example: On 31st December, a clothing store’s balance sheet shows £80,000 in assets, £30,000 in liabilities, and £50,000 in owner equity.The assets include £10,000 in cash, £40,000 in inventory, and £30,000 in equipment. The liabilities consist of £20,000 in loans and £10,000 in accounts payable. The equity represents the owner's investment and retained earnings.