Balance sheet

In financial accounting, a balance sheet or

statement of financial position is a
summary of the financial balances of an
individual or organization, whether it be a
sole proprietorship, a business
partnership, a corporation, private limited
company or other organization such as
Government or not-for-profit entity. Assets,
liabilities and ownership equity are listed
as of a specific date, such as the end of its
financial year. A balance sheet is often
described as a "snapshot of a company's
financial condition".[1] Of the four basic
financial statements, the balance sheet is
the only statement which applies to a
single point in time of a business' calendar
year.

A standard company balance sheet has

two sides: assets, on the left and
financing, which itself has two parts,
liabilities and ownership equity, on the
right. The main categories of assets are
usually listed first, and typically in order of
liquidity.[2] Assets are followed by the
liabilities. The difference between the
assets and the liabilities is known as
equity or the net assets or the net worth or
capital of the company and according to
the accounting equation, net worth must
equal assets minus liabilities.[3]

Another way to look at the balance sheet

equation is that total assets equals
liabilities plus owner's equity. Looking at
the equation in this way shows how assets
were financed: either by borrowing money
(liability) or by using the owner's money
(owner's or shareholders' equity). Balance
sheets are usually presented with assets
in one section and liabilities and net worth
in the other section with the two sections
"balancing".

A business operating entirely in cash can

measure its profits by withdrawing the
entire bank balance at the end of the
period, plus any cash in hand. However,
many businesses are not paid
immediately; they build up inventories of
goods and they acquire buildings and
equipment. In other words: businesses
have assets and so they cannot, even if
they want to, immediately turn these into
cash at the end of each period. Often,
these businesses owe money to suppliers
and to tax authorities, and the proprietors
do not withdraw all their original capital
and profits at the end of each period. In
other words, businesses also have
liabilities.

Types
A balance sheet summarizes an
organization or individual's assets, equity
and liabilities at a specific point in time.
Two forms of balance sheet exist. They
are the report form and the account form.
Individuals and small businesses tend to
have simple balance sheets.[4] Larger
businesses tend to have more complex
balance sheets, and these are presented in
the organization's annual report.[5] Large
businesses also may prepare balance
sheets for segments of their businesses.[6]
A balance sheet is often presented
alongside one for a different point in time
(typically the previous year) for
comparison.[7][8]

Personal

A personal balance sheet lists current

assets such as cash in checking accounts
and savings accounts, long-term assets
such as common stock and real estate,
current liabilities such as loan debt and
mortgage debt due, or overdue, long-term
liabilities such as mortgage and other loan
debt. Securities and real estate values are
listed at market value rather than at
historical cost or cost basis. Personal net
worth is the difference between an
individual's total assets and total
liabilities.[9]

US small business
Sample Small Business Balance Sheet[10]
Assets (current) Liabilities and Owners' Equity

Cash $6,600 Liabilities

Accounts Receivable $6,200 Notes Payable $5,000

Assets (non-current) Accounts Payable $25,000

Tools and equipment $25,000 Total liabilities $30,000

Owners' equity

Capital Stock $7,000

Retained Earnings $800

Total owners' equity $7,800

Total $37,800 Total $37,800

A small business balance sheet lists
current assets such as cash, accounts
receivable, and inventory, fixed assets
such as land, buildings, and equipment,
intangible assets such as patents, and
liabilities such as accounts payable,
accrued expenses, and long-term debt.
Contingent liabilities such as warranties
are noted in the footnotes to the balance
sheet. The small business's equity is the
difference between total assets and total
liabilities.[11]

Public business entities

structure
Guidelines for balance sheets of public
business entities are given by the
International Accounting Standards Board
and numerous country-specific
organizations/companies. The standard
used by companies in the USA adhere to
U.S. Generally Accepted Accounting
Principles (GAAP). The Federal Accounting
Standards Advisory Board (FASAB) is a
United States federal advisory committee
whose mission is to develop generally
accepted accounting principles (GAAP) for
federal financial reporting entities.

Balance sheet account names and usage

depend on the organization's country and
the type of organization. Government
organizations do not generally follow
standards established for individuals or
businesses.[12][13][14]

If applicable to the business, summary

values for the following items should be
included in the balance sheet:[15] Assets
are all the things the business owns. This
will include property, tools, vehicles,
furniture, machinery, and so on.

Assets

Non-current assets (Fixed assets)

1. Property, plant and equipment

2. Investment property, such as real estate
held for investment purposes
3. Intangible assets such as (patents,
copyrights and goodwill)
4. Financial assets (excluding investments
accounted for using the equity method,
accounts receivables, and cash and cash
equivalents), such as notes receivables
5. Investments accounted for using the
equity method
6. Biological assets, which are living plants
or animals. Bearer biological assets are
plants or animals which bear agricultural
produce for harvest, such as apple trees
grown to produce apples and sheep raised
to produce wool.[16]
7. Loan To (More than one financial
period)

Current assets

1. Prepaid expenses for future services

that will be used within a year
2. Accounts receivable
3. Cash and cash equivalents
4. inventories
5. Cash at bank, Petty Cash, Cash On Hand
6. Revenue Earned In Arrears (Accrued
Revenue) for services done but not yet
received for the year
7. Loan To (Less than one financial period)

Liabilities

1. Accounts payable
2. Provisions for warranties or court
decisions (contingent liabilities that are
both probable and measurable)
3. Financial liabilities (excluding provisions
and accounts payables), such as
promissory notes and corporate bonds
4. Liabilities and assets for current tax
5. Deferred tax liabilities and deferred tax
assets
6. Unearned revenue for services paid for
by customers but not yet provided
7. Interests on loan stock

Equity / capital

The net assets shown by the balance

sheet equals the third part of the balance
sheet, which is known as the shareholders'
equity. It comprises:

1. Issued capital and reserves attributable

to equity holders of the parent company
(controlling interest)
2. Non-controlling interest in equity

Formally, shareholders' equity is part of the

company's liabilities: they are funds
"owing" to shareholders (after payment of
all other liabilities); usually, however,
"liabilities" is used in the more restrictive
sense of liabilities excluding shareholders'
equity. The balance of assets and
liabilities (including shareholders' equity)
is not a coincidence. Records of the values
of each account in the balance sheet are
maintained using a system of accounting
known as double-entry bookkeeping. In
this sense, shareholders' equity by
construction must equal assets minus
liabilities, and thus the shareholders'
equity is considered to be a residual.

Regarding the items in equity section, the

following disclosures are required:
1. Numbers of shares authorized, issued
and fully paid, and issued but not fully paid
2. Par value of shares
3. Reconciliation of shares outstanding at
the beginning and the end of the period
4. Description of rights, preferences, and
restrictions of shares
5. Treasury shares, including shares held
by subsidiaries and associates
6. Shares reserved for issuance under
options and contracts
7. A description of the nature and purpose
of each reserve within owners' equity

Substantiation
Balance sheet substantiation is the
accounting process conducted by
businesses on a regular basis to confirm
that the balances held in the primary
accounting system of record (e.g. SAP,
Oracle, other ERP system's General
Ledger) are reconciled (in balance with)
with the balance and transaction records
held in the same or supporting sub-
systems.

Balance sheet substantiation includes

multiple processes including reconciliation
(at a transactional or at a balance level) of
the account, a process of review of the
reconciliation and any pertinent
supporting documentation and a formal
certification (sign-off) of the account in a
predetermined form driven by corporate
policy.

Balance sheet substantiation is an

important process that is typically carried
out on a monthly, quarterly and year-end
basis. The results help to drive the
regulatory balance sheet reporting
obligations of the organization.

Historically, balance sheet substantiation

has been a wholly manual process, driven
by spreadsheets, email and manual
monitoring and reporting. In recent years
software solutions have been developed to
bring a level of process automation,
standardization and enhanced control to
the balance sheet substantiation or
account certification process. These
solutions are suitable for organizations
with a high volume of accounts and/or
personnel involved in the Balance Sheet
Substantiation process and can be used to
drive efficiencies, improve transparency
and help to reduce risk.

Balance sheet substantiation is a key

control process in the SOX 404 top-down
risk assessment.
Sample
The following balance sheet is a very brief
example prepared in accordance with
IFRS. It does not show all possible kinds of
assets, liabilities and equity, but it shows
the most usual ones. Because it shows
goodwill, it could be a consolidated
balance sheet. Monetary values are not
shown, summary (subtotal) rows are
missing as well.

Under IFRS items are always shown based

on liquidity from the least liquid assets at
the top, usually land and buildings to the
most liquid, i.e. cash. Then liabilities and
equity continue from the most immediate
liability to be paid (usual account payable)
to the least i.e. long term debt such a
mortgages and owner's equity at the very
bottom.[17]

Consolidated Statement of
Finance Position of XYZ,
Ltd.
As of 31 December 2025

ASSETS
Non-Current Assets (Fixed
Assets)
Property, Plant and
Equipment (PPE)
 Less : Accumulated
Depreciation
Goodwill
Intangible Assets (Patent,
Copyright, Trademark, etc.)
Less : Accumulated
Amortization
Investments in Financial
assets due after one year
Investments in Associates
and Joint Ventures
Other Non-Current Assets,
e.g. Deferred Tax Assets,
Lease Receivable and
Receivables due after one
year
Current Assets
Inventories
Prepaid Expenses
Investments in Financial
assets due within one year
Non-Current and Current
Assets Held for sale
Accounts Receivable
(Debtors) due within one
year
Less : Allowances for
Doubtful debts
Cash and Cash Equivalents

TOTAL ASSETS (this will

match/balance the total for
Liabilities and Equity
below)

LIABILITIES and EQUITY

Current Liabilities
(Creditors: amounts falling
due within one year)
Accounts Payable
Current Income Tax Payable
Current portion of Loans
Payable
Short-term Provisions
Other Current Liabilities,
e.g. Deferred income,
Security deposits

Non-Current Liabilities
(Creditors: amounts falling
due after more than one
year)
Loans Payable
Issued Debt Securities,
e.g. Notes/Bonds Payable
Deferred Tax Liabilities
Provisions, e.g. Pension
Obligations
Other Non-Current
Liabilities, e.g. Lease
Obligations
EQUITY
Paid-in Capital
Share Capital (Ordinary
Shares, Preference Shares)
Share Premium
Less: Treasury Shares
Retained Earnings
Revaluation Reserve
Other Accumulated Reserves
Accumulated Other
Comprehensive Income

Non-Controlling Interest
 TOTAL LIABILITIES and EQUITY
(this will match/balance the
total for Assets above)

See also
Wikimedia Commons has media related
to Balance sheets.

Balance sheet substantiation

Cash flow statement
Income statement
Minority interest
Model audit
National accounts
 Off-balance-sheet
Reformatted balance sheet
Sheet
statement of changes in equity

References
1. Williams, Jan R.; Susan F. Haka; Mark S.
Bettner; Joseph V. Carcello (2008).
Financial & Managerial Accounting.
McGraw-Hill Irwin. p. 40. ISBN 978-0-07-
299650-0.
2. Daniels, Mortimer (1980). Corporation
Financial Statements. New York: New York :
Arno Press. pp. 13–14. ISBN 0-405-13514-
9.
3. Williams, p.50
4. "US Small Business Administration
sample spreadsheet for a small business" .
Archived from the original on 2007-07-15.
Retrieved 2003-08-10.
5. "Microsoft Corporation balance sheet,
June 30, 2004" . Microsoft.com. Retrieved
2012-10-04.
6. "International Business Machines "Global
Financing" balance sheet comparing 2003
to 2004" . Ibm.com. Retrieved 2012-10-04.
7. "Balance sheet comparing two year-end
balance sheets" . Retrieved 2012-10-04.
8. "Balance sheet comparing two year-end
balance sheets" . Archived from the
original on 2007-10-19. Retrieved
2010-05-08.
9. "Personal balance sheet structure" (PDF).
Archived from the original (PDF) on 2008-
03-07. Retrieved 2010-05-08.
10. Williams, p. 50.
11. Small Business Administration
12. "Personal balance sheet structure" .
Archived from the original on 2007-11-19.
Retrieved 2010-05-08.
13. STATE OF ALABAMA CHART OF
ACCOUNTS
14. New York State (USA) public utilities
balance sheet accounts
15. "Presentation of Financial Statements"
International Accounting Standards Board.
Accessed 24 June 2007.
16. Epstein, Barry J.; Eva K. Jermakowicz
(2007). Interpretation and Application of
International Financial Reporting Standards.
John Wiley & Sons. p. 931. ISBN 978-0-471-
79823-1.
17. "IFRS VS GAAP: BALANCE SHEET AND
INCOME STATEMENT" (web). Accounting-
financial-tax.com.

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