Balance sheet is referred to as a financial document or a statement, which provides information about the company’s assets, liabilities and shareholders’ equity. These three sections of the balance sheet tell the person who wants to invest his money in the company, about what exactly the company owns and how much it is under debt. It has got its name from the fact that the two sides of the sheet balance out. Basically, organization needs money for the assets it owns and it get the money from the shareholders or by borrowing it. Thus, these three sections essentially make up the balance sheet. Information pertaining to cash, inventory, property, etc. is listed under the asset part. Similarly, the information about debts and payable accounts is listed under the liabilities. Balance sheet, in short, tells about the financial health of any company or organization, making it of high importance. The formula for calculating it is; Assets = Liabilities + Shareholders’ Equity.
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What is Balance Sheet?
