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Balance Sheet: Definition and Meaning
Definition
A balance sheet is a financial statement that reports a company’s assets, liabilities, and equity at a specific point in time.
Why It Matters
The balance sheet helps management, owners, lenders, and advisors understand what a business owns, what it owes, and the residual interest of its owners. It can provide insight into liquidity, working capital, debt levels, capital investment, and financial strength.
A balance sheet is most useful when reviewed together with the income statement, cash flow statement, and supporting schedules for receivables, payables, debt, inventory, and project activity.
Example
A month-end balance sheet may list cash, accounts receivable, equipment, accounts payable, loans, accrued expenses, and owners’ equity.
Related Terms
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