Balance Sheet.

In plain English

A balance sheet is one of the core financial statements. It lists three things as of a specific date: assets (what the business owns, like cash, equipment, and money customers owe you), liabilities (what the business owes, like loans and unpaid bills), and equity (what is left for the owner after subtracting liabilities from assets). The name comes from the rule that it must always balance: assets equal liabilities plus equity. Unlike a profit and loss statement, which covers a stretch of time, a balance sheet is a single frozen moment.

01Why it matters

Lenders and investors read your balance sheet before they hand over money, and it tells you whether your business could survive if income stopped tomorrow. A pile of revenue means little if you owe more than you own.

02The math, step by step

Imagine a small bakery on December 31. Assets: $8,000 in the bank, $4,000 in ovens and mixers, and $1,000 customers still owe. That is $13,000 in assets. Liabilities: a $5,000 equipment loan and $1,000 in unpaid supplier bills, so $6,000 owed. Equity is $13,000 minus $6,000, which equals $7,000. The sheet balances: $13,000 in assets equals $6,000 in liabilities plus $7,000 in equity.

03What this is NOT

04Receipts

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