What is a balance sheet, and can you explain liabilities, assets, and equity?

Question

Accepted Answer

Balance sheet shows a company's financial position with assets, liabilities, and equity.

Balance sheet is a financial statement that shows a company's assets, liabilities, and equity at a specific point in time.
Assets are resources owned by the company, such as cash, inventory, and property.
Liabilities are obligations or debts owed by the company, such as loans, accounts payable, and bonds.
Equity represents the company's net worth, calculated as assets minus liabilities. It includes common stock, retained earnings, and additional paid-in capital.
The balance sheet equation is Assets = Liabilities + Equity, showing that the company's assets are financed by either debt (liabilities) or equity.
For example, if a company has $100,000 in assets, $60,000 in liabilities, and $40,000 in equity, the balance sheet would show Assets = $100,000, Liabilities = $60,000, and Equity = $40,000.

Accepted Answer

The balance sheet displays the company's total assets and how the assets are financed, either through either debt or equity. It can also be referred to as a statement of net worth or a statement of financial position. The balance sheet is based on the fundamental equation.

Assets= Liabilities+Equity