Balance Sheet

A balance sheet is a financial statement that provides a snapshot of a company's financial position at a specific point in time. It summarises what the company owns (assets), what it owes (liabilities), and the owners' equity in the company. The balance sheet is divided into three main sections:

Assets

Resources owned by the company that are expected to bring future economic benefits. 

Assets are typically categorised into:

Current Assets: Assets that are expected to be converted to cash or used up within one year, such as cash, accounts receivable, and inventory.

Non-Current Assets: Long-term investments and assets not expected to be liquidated within a year, such as property, plant, equipment, and intangible assets like patents and trademarks.

Liabilities

Obligations that the company owes to outside parties. 

Liabilities are also divided into:

Current Liabilities: Debts and obligations due within one year, such as accounts payable, short-term loans, and accrued expenses.

Non-Current Liabilities: Long-term debts and obligations not due within the next year, such as long-term loans, bonds payable, and deferred tax liabilities.

Equity

The residual interest in the assets of the company after deducting liabilities. Equity represents the owners' claim on the business and includes:

Share Capital: Funds raised from issuing shares to shareholders.

Retained Earnings: Cumulative profits that have been reinvested in the business rather than distributed as dividends.

The balance sheet follows the accounting equation:

Assets = Liabilities + Equity

This equation must always balance, hence the name "balance sheet." It ensures that all resources (assets) are financed either by borrowing money (liabilities) or through the owner's investment (equity).