What is a Balance Sheet?

A Balance Sheet summarises a business’ financial position at a specific time, normally the end of an accounting period. Made up of three parts and presented in two sections as the name suggests each section must balance. It shows what assets and liabilities the business has as well as how it is funded.

Assets = Liabilities – Shareholder’s Equity

An asset is anything that a business owns that has a monetary value; examples of which include plant and machinery, stock, trade debtors and cash in the bank

A liability is something which a business owes to its creditors; examples of which include amounts due to suppliers, taxes, loans and hire purchase.

Shareholder’s Equity is the difference between the assets and liabilities and represents the net worth of the business.

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