What is a Balance Sheet

The balance sheet is a summary of the financial balances of a business. Assets, liabilities and ownership equity are detailed as of a particular date. For example the end of the 2nd quarter.

The balance sheet is often referred to by accountants as a “snapshot of a company’s financial condition”. There are four different types of financial statements but the balance sheet is the only one which shows you the status of a business as of a specific date.

The formula for a balance sheet is assets = liabilities + equity.

The basis of a balance sheet starts with the income statement. An incoming statement is revenues – expenses = net income or net loss.

Next comes the retained earnings statement, which equals beginning retained earnings + net income + additional capital(capital contribution) – dividends/drawings = ending retained earnings.