Balance Sheet Definition

Balance Sheet Definition: The Balance Sheet is the last financial statement that is prepared by any organization. This statement helps to ascertain the true financial position of an enterprise at the end of an accounting period. It is a statement that is prepared to ascertain the values of assets and liabilities of a business on a particular date. In other words, a Balance Sheet can be defined as a financial status report of an organization that imparts information related to various assets and liabilities of an organization at the closing of an accounting period. The preparation of the Balance Sheet is compulsory as it is an integral part of financial statements. It is prepared with the help of real and personal accounts balances. It reveals the solvency and liquidity position of a firm on a particular date. An important point to be noted here is that the Balance Sheet is a statement and not an account.

Though similar to an account it also has two sides named Assets and Liabilities, but it is not prepared by following the accounting rule of debit and credit. The assets of a firm are shown on the right-hand side under the head “Assets” and liabilities are shown on the left-hand side under the head “Liabilities” of the Balance Sheet. Liabilities consist of the owner’s / proprietor’s funds and creditors. It should be noted that the sum total of the assets side is always equal to the sum total of its liabilities side. Thus, a Balance Sheet can be defined as a statement depicting a true and fair view of a firm’s financial position at the end of an accounting period.

Balance Sheet Definition in Freeman’s word

In the words of Freeman, “A Balance Sheet is an item-wise list of assets, liabilities, and proprietorship of a business at a certain date”. According to Francis R. Stead, “A Balance Sheet is a screen picture of the financial position of a going business at a certain moment”.


Also, Read

Trading Account

Trading Account is an account that is prepared to ascertain the trading results of a firm in form of gross profit earned or gross loss incurred during an accounting period.

Users of Financial Statements

The users of financial statements can be broadly classified as Internal Users and External Users. Internal Users are the users who have direct access to the financial statements

Financial Statements

Financial statements reveal the profitability and financial position of a business at the end of the accounting year. It provides financial information to various accounting users that

What is a Promissory Note?

A promissory note is an unconditional promise in writing given by the buyer (or creditor) to the seller (or debtor) to pay the amount of money specified therein to the seller or to the order of seller or to bearer.