A Balance Sheet is a statement of the assets, liabilities, and capital of a business or other organization at a particular point in time, detailing the balance of income and expenditure over the preceding period. A Balance Sheet is one of the main financial statements. The balance sheet reports the assets, liabilities, and owner's (stockholders') equity at a specific point in time, such as December 31. The balance sheet is also referred to as the Statement of Financial Position.
The balance sheet informs the reader of a company's financial position as of one moment in time, it allows someone—like a creditor—to see what a company owns as well as what it owes to other parties as of the date indicated in the heading. This is valuable information to the banker who wants to determine whether or not a company qualifies for additional credit or loans. Others who would be interested in the balance sheet include current investors, potential investors, company management, suppliers, some customers, competitors, government agencies, and labor unions.
Unlike the income statement which shows how a company performed over a period of time, a balance sheet shows a business’ financial health at a single point in time. This will take the form of an exact date, like 9/30/2013 for example, and is usually prepared at a month or quarter’s end or most typically - the end of the year.
The balance sheet lets you know exactly what things of value a company controls (assets) and who owns those assets: someone else (liabilities) or the business owner (owner’s equity)
You want your balance sheet to be accurate. Inaccuracies on the balance sheet are easy for a seasoned viewer to spot and will throw up red flags when you are looking for financing or getting audited.
Even if you run as an Entrepreneurial Soldier of Fortune, you want to know if you are making money or not. And also why and how, what service or product is working or not working on a long term financial basis. A Balance Sheet is part of knowing what you know about your business.
Bankers like to look at it.
In financial accounting, a balance sheet or statement of financial position is a summary of the financial balances of a sole proprietorship, a business partnership, a corporation or other business organization, such as an LLC or an LLP. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year.
Most accounting balance sheets classify a company's assets and liabilities into distinctive groupings such as Current Assets; Property, Plant, and Equipment; Current Liabilities; etc. These classifications make the balance sheet more useful.
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