Balance sheet

Let's explore the balance sheet, also called the statement of financial position. This key financial statement serves as a snapshot of a company's health at a single point in time. While the income statement reveals performance over a period, the balance sheet shows what the business owns, owes, and the residual left to its owners on a specific date. The major elements are assets, liabilities, and equity. Internationally, so statement of financial position is common. While in the United States, balance sheet is more widely used, but both refer to the same report. Every balance sheet is built from three essential elements, assets, liabilities and equity. Assets include cash, inventory, property, accounts receivable, and intangible items like patents or goodwill. Liabilities are obligations such as loans, accounts payable, and other debts. Equity is the owner's residual interest, the portion of assets left after debts. The accounting equation, assets equals liabilities plus equity must always balance and ensure sources of funding match the company's resources. The balance sheet distinguishes between current and non current items. Current assets like cash and inventory are expected to be converted to cash or used within a year, while non current assets, such as property or equipment, benefit the company over longer periods. Liabilities follow the same distinction. Current liabilities are due within a year, while non current liabilities, such as long term loans, extend beyond that.