The balance sheet (or statement of financial position) is one of the three basic financial statements that every business owner analyses to make financial decisions. Owners also review the income statement (Profit & Loss report) and the cash flow statement.
A balance sheet reports your firm’s assets, liabilities and equity as of a specific date. This discussion explains each component of the balance sheet in detail, and provides some ratios that can help you make better financial decisions.
The accounting equation (also known as the balance sheet formula) is a great tool to understand how these concepts fit together.