Balance Sheet
A balance sheet is a financial statement that summarizes a company’s assets, liabilities, and shareholders’ equity at a specific point in time. These three balance sheet segments give investors an idea as to what the company owns and owes, as well as the amount invested by the shareholders. The balance sheet is one of the three fundamental financial statements. These statements are key to both financial modeling and accounting.
History of the Balance Sheet
The balance sheet has been around since the early days of accounting. It was first used by Italian mathematician Luca Pacioli in 1494. Pacioli is often referred to as the “father of accounting” and his work was the first to lay out the fundamentals of double-entry bookkeeping. The balance sheet has since evolved and is now used by companies all over the world to track their financial performance.
Comparison of Assets, Liabilities, and Equity
| Assets | Liabilities | Equity |
|---|---|---|
| Cash | Accounts Payable | Common Stock |
| Inventory | Long-term Debt | Retained Earnings |
| Property, Plant, and Equipment | Accrued Expenses | Treasury Stock |
Summary
The balance sheet is an essential financial statement that provides an overview of a company’s assets, liabilities, and shareholders’ equity. It is one of the three fundamental financial statements and is used by investors to assess a company’s financial health. For more information about the balance sheet, you can visit Investopedia, The Balance, or the Financial Accounting Standards Board (FASB).
See Also
- Income Statement
- Cash Flow Statement
- Accounting Equation
- Working Capital
- Debt-to-Equity Ratio
- Return on Equity
- Return on Assets
- Gross Profit Margin
- Net Profit Margin
- Current Ratio
