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Understanding the Balance Sheet

Originally Published: February 2010

by Christine Newhouse
Director Accounting, ABC-Amega Inc.

Assets = Shareholders’ Equity + Liabilities

The equation above represents the primary components of the balance sheet, an integral part of a company’s financial statements.

The balance sheet highlights the financial position of a company at a particular point in time (generally the last day of its fiscal year). This financial statement is so named simply because the two sides of the Balance Sheet (Total Assets and Total Shareholder’s Equity and Liabilities) must balance.

Of the three primary financial statements – Balance Sheet, Income Statement, and Statement of Cash Flows – the Balance Sheet is the only one that provides data at a single point in time, rather than over a defined time period.