What is a balance sheet in accounting?

What Is a Balance Sheet? A balance sheet is a financial statement that shows the relationship between assets, liabilities, and shareholders’ equity of a company at a specific point in time. Measuring a company’s net worth, a balance sheet shows what a company owns and how these assets are financed, either through debt or equity.

What is a balance sheet used for?

Balance sheets can be used with other important financial statements to conduct fundamental analysis or calculate financial ratios. A balance sheet is a financial statement that reports a company's assets, liabilities, and shareholder equity.

How is a balance sheet arranged?

Balance sheets are typically organized according to the following formula: Assets = Liabilities + Owners’ Equity The formula can also be rearranged like so: Owners’ Equity = Assets - Liabilities or Liabilities = Assets - Owners’ Equity A balance sheet must always balance; therefore, this equation should always be true.