Legal Definitions - balance sheet

A balance sheet is a financial statement that shows a company's assets, liabilities, and ownership equity at a specific point in time. It gives an overview of the financial health of a company.

The balance sheet has two sides:

• Assets (movable and unmovable) on one side
• Liabilities and equity on the other side

Both sides must balance out with each other.

Here are some examples of items that might appear on a balance sheet:

• Assets: cash, inventory, property, equipment, investments
• Liabilities: loans, accounts payable, taxes owed
• Equity: retained earnings, common stock

For example, if a company has $100,000 in assets, it must also have $100,000 in liabilities and equity combined. This shows that the company has a balanced financial position.

A balance sheet is typically prepared on a yearly, quarterly, or monthly basis to reflect the financial condition of the company. It can also be prepared when a business is sold to show the financial position of the company at the time of the sale.