A financial statement that provides a snapshot of a company's financial position, showing its assets, liabilities, and shareholders' equity at a specific point in time.
A balance sheet is a financial statement that provides a snapshot of a company's financial position at a specific point in time. It presents a summary of a business's assets, liabilities, and owner's equity. Assets represent what the company owns, such as cash, inventory, and property, while liabilities represent what the company owes, such as loans and accounts payable. Owner's equity represents the owner's investment in the business. The balance sheet demonstrates the fundamental accounting equation: assets equal liabilities plus owner's equity. By examining the balance sheet, small business owners can assess their company's solvency, liquidity, and overall financial health, aiding in decision-making, securing financing, and attracting investors.