A condensed statement that shows the financial position of an entity on a specified date (usually the last day of an accounting period).
Among other items of information, a balance sheet states
(1) what assets the entity owns,
(2) how it paid for them,
(3) what it owes (its liabilities),and
(4) what is the amount left after satisfying the liabilities. Balance sheet data is based on a fundamental accounting equation (assets = liabilities + owners’ equity), and is classified under subheadings such as current assets, fixed assets, current liabilities, Long-term Liabilities.
With income statement and cash flow statement, it comprises the set of documents indispensable in running a business. An audited balance sheet is often demanded by investors, lenders, suppliers, and taxation authorities; and is usually required by law.
To be considered valid, a balance sheet must give a true and fair view of an organization’s state of affairs, and must follow the provisions of GAAP in its preparation. Also called statement of condition, statement of financial condition, or statement of financial position.
Before filing taxes, the accountant must look at the company’s balance sheet to ensure that all assets, liabilities, and owners’ equity have been accounted for.
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