What is Balance Sheet?

The balance sheet is a financial statement that shows a company's assets, liabilities and shareholders' equity at a single point in time, governed by the accounting equation Assets = Liabilities + Equity.

The balance sheet is a snapshot, not a movie — it captures what the business owns and owes on a specific date. Assets are split between current (within one year) and non-current; liabilities likewise. Equity is the residual claim of the owners.

Together with the income statement and cash flow statement, the balance sheet completes the trio of primary financial statements. Ratios like debt-to-equity, current ratio and return on equity are all derived from it.

Formula

Assets = Liabilities + Equity

Example

On 31 December a company shows CHF 5m in assets (cash, receivables, equipment), CHF 3m in liabilities (loans, payables) and CHF 2m in equity — the equation balances.

Related terms

Income Statement

The income statement (or profit and loss statement, P&L) reports a company's revenues, expenses and profits over a specific period, showing whether the business made money and how.

Cash Flow Statement

The cash flow statement reports the actual cash entering and leaving a business over a period, split into operating, investing and financing activities.

Working Capital

Working capital is the difference between a company's current assets and its current liabilities, measuring the short-term liquidity available to fund day-to-day operations.

Depreciation

Depreciation is the systematic allocation of the cost of a tangible long-lived asset over its useful life, reflecting wear and tear as an expense on the income statement.

Frequently asked questions

Why must the balance sheet balance?+

By definition: every asset must be financed either by a liability (someone else's claim) or by equity (the owners' claim).

How often is it published?+

Listed companies publish quarterly or semi-annually; private companies usually annually.

What is shareholders' equity?+

The residual interest in the assets after deducting liabilities — what the owners would receive if the business were wound down.