Balance Sheet

Meaning:

A balance sheet is a financial statement that provides a snapshot of a company’s  financial position at a specific point in time. It shows what the company owns (assets), what it  owes (liabilities), and the owners’ equity (shareholders’ capital).

Example:

For instance, if a company has ₹5,00,000 in cash, ₹3,00,000 in inventory, and owes  ₹2,00,000 to suppliers, the balance sheet will reflect these amounts to provide a clear picture

of its financial health.

How to understand balance sheet:

It is divided into three main parts: assets, liabilities, and equity.

The accounting equation is: Assets = Liabilities + Shareholders’ Equity.

This equation must always balance, showing how the company finances its operations.

Importance of balance sheet:

It helps track the company’s growth over time.

It allows management to make informed decisions about spending and investments.

It builds trust with investors and lenders by showing the company’s financial reliability.