Short definition: A balance sheet is a financial statement that reports a company’s assets, liabilities, and shareholders’ equity at a specific point in time.
Explanation: It provides a snapshot of a company’s financial position, showing what it owns (assets), what it owes (liabilities), and the amount invested by shareholders (equity). The balance sheet is based on the fundamental accounting equation: Assets = Liabilities + Equity.
Example: A company’s balance sheet might show assets such as cash, accounts receivable, inventory, and property, plant, and equipment (PP&E). Liabilities might include accounts payable, loans, and bonds payable. Shareholders’ equity might include common stock, retained earnings, and additional paid-in capital.
Additional information (optional): The balance sheet is one of the three core financial statements, along with the income statement and cash flow statement. It is used by investors, creditors, and other stakeholders to assess a company’s financial health and make informed decisions about investing or lending to the company.