The balance sheet is the accounting report of the financial status of a company at a given time in which its economic situation is reflected.
The balance sheet, also known as balance sheet or statement of financial position, is part of the accounts that every company must make annually in each accounting year, usually once a year.
To make the balance sheet, the accounts are arranged in three basic groups that represent each of the different assets of the company: assets, liabilities and equity.
In the assets you will find all the assets and economic rights available to the company, as well as all those elements that can generate money to the company: cash, money in banks, accounts receivable, materials, merchandise, machinery, vehicles , premises, etc.
In liabilities, meanwhile, they will be reflected all obligations of an economic nature incurred by the company. These include debts, loans, deferred payment purchases, taxes payable, etc.
The net equity, finally, results from the assets after deducting the liabilities, and includes the contributions of the owners or shareholders, as well as the accumulated results. Net worth is what shows the ability of a company or company to finance itself.
In sum, to make a balance sheet you must consider what you have, subtract what is owed, and the result of this operation will be equity, or, in other words: assets – liabilities = equity.
The information offered by the balance sheet is essential to be aware of the debts or the state of liquidity, which is very important for decision making and the administration of resources in a company. The balance sheets are prepared by accounting professionals.