Introduction to Balance Sheets

A balance sheet is a financial statement that provides a detailed overview of a company’s assets, liabilities, and equity at a specific point in time. It follows the fundamental accounting equation: Assets = Liabilities + Equity, which highlights the relationship between what the company owns and owes. Assets include everything from cash and inventory to property and equipment, while liabilities encompass obligations like loans and accounts payable. Equity represents the owner’s stake in the business after all liabilities have been deducted from assets. By examining a balance sheet, stakeholders can gain valuable insights into the company’s financial stability, operational efficiency, and overall performance, making it an indispensable tool for both management and investors.