statement of total assets, liabilities, and owners' equity a financial report stating the total assets, liabilities, and owners' equity of an organization at a given date, usually the last day of the accounting period. The credit side of the balance sheet states assets, while the debit side states liabilities and equity, and the two sides must be equal, or balance.
Assets include cash in hand and cash anticipated (receivables), inventories of supplies and materials, properties, facilities, equipment, and whatever else the company uses to conduct business. Assets also need to reflect depreciation in the value of equipment such as machinery that has a limited expected useful life.
Liabilities include pending payments to suppliers and creditors, outstanding current and long-term debts, taxes, interest payments, and other unpaid expenses that the company has incurred.
Subtracting the value of aggregate liabilities from the value of aggregate assets reveals the value of owners' equity. Ideally, it should be positive. Owners' equity consists of capital invested by owners over the years and profits (net income) or internally generated capital, which is referred to as "retained earnings"; these are funds to be used in future operations.
As an example:
|Inventory & supplies||6,300|
|Equipment (less depreciation)||5,000|
|Bonds & notes||25,000|
|SHAREHOLDERS' EQUITY (stock, par value × shares outstanding)||80,000|
|TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY||129,000|
Related definitions of "balance sheet"
- Abbr B/S