Balance sheet formal bookkeeping and accounting
, a balance sheet
is a statement of the financial value (or "worth") of a business or other organisation (or person) at a particular date, usually at the end of its "fiscal year
," as distinct from a profit and loss statement
(or "P&L"), which records income and expenditures over some period. Therefore a balance sheet is often described as a "snapshot" of the company's financial condition at that time.
The balance sheet has two parts: assets on the left-hand ("debit") side or at the top and liabilities on the right-hand ("credit") side or at the bottom. The assets of the company -- money ("in hand" or owed to it), investments (including securities and real estate), and other property -- are equal to the claims for payments of the persons or organisations owed -- the creditors, lenders, and shareholders. This standard format for balance sheets is derived from the principle of double-entry bookeeping.
According to the basic accounting equation:
- assets = liabilities + equity
- assets - liabilities = equity.
Equity, which is the shareholders' interest (= "net worth
"), may not reflect the company's true value, since assets are normally shown (= "carried") on the balance sheet at what the company paid for them
, without any adjustment for increases
in their value since then.
see also other financial statements