Editing Balance sheet (section)

{{Short description|Accounting financial summary}}
{{Globalize|article|USA|2name=the United States|date=July 2019}}
{{Accounting}}
In [[financial accounting]], a '''balance sheet''' (also known as '''statement of financial position''' or '''statement of financial condition''') is a summary of the financial balances of an individual or organization, whether it be a [[sole proprietorship]], a [[Partnership|business partnership]], a [[corporation]], [[private limited company]] or other organization such as [[Government financial statements|government]] or [[Nonprofit organization|not-for-profit entity]]. [[Asset]]s, [[liability (financial accounting)|liabilities]] and [[Equity (finance)|ownership equity]] are listed as of a specific date, such as the end of its [[financial year]]. A balance sheet is often described as a "snapshot of a company's financial condition".<ref>{{cite book |last=Williams |first=Jan R. |author2=Susan F. Haka |author3=Mark S. Bettner |author4=Joseph V. Carcello  |title=Financial & Managerial Accounting |publisher=McGraw-Hill Irwin |year=2008 |page=40 |isbn=978-0-07-299650-0}}</ref>  It is the summary of each and every financial statement of an [[organization]].

Of the four basic [[financial statement]]s, the balance sheet is the only statement which applies to a single point in time of a business's calendar year.<ref>{{Cite web |date=2022-11-28 |title=Four Types of Financial Statements |url=https://online.mason.wm.edu/blog/four-types-of-financial-statements |access-date=2024-02-15 |website=William & Mary |language=en}}</ref>

A standard company balance sheet has two sides: assets on the left, and financing on the right–which itself has two parts; liabilities and ownership [[equity (finance)|equity]].  The main categories of assets are usually listed first, and typically in order of [[market liquidity|liquidity]].<ref>{{cite book | last = Daniels | first = Mortimer | title = Corporation Financial Statements | publisher = Arno Press | location = New York City| year = 1980 | isbn = 0-405-13514-9 | pages = 13–14}}</ref> Assets are followed by the liabilities. The difference between the assets and the liabilities is known as equity or the net assets or the [[net worth]] or [[financial capital|capital]] of the company and according to the [[accounting equation]], net worth must equal assets minus liabilities.<ref>Williams, p.50</ref>

Another way to look at the balance sheet equation is that total assets equals liabilities plus owner's equity. Looking at the equation in this way shows how assets were financed: either by borrowing money (liability) or by using the owner's money (owner's or shareholders' equity). Balance sheets are usually presented with assets in one section and liabilities and net worth in the other section with the two sections "balancing".

A business operating entirely in cash can measure its profits by withdrawing the entire bank balance at the end of the period, plus any cash in hand. However, many businesses are not paid immediately; they build up inventories of goods and acquire buildings and equipment. In other words: businesses have [[asset]]s and so they cannot, even if they want to, immediately turn these into cash at the end of each period. Often, these businesses owe money to suppliers and to tax authorities, and the proprietors do not withdraw all their original capital and profits at the end of each period. In other words, businesses also have [[liability (financial accounting)|liabilities]].