Definition
The balance sheet, called the statement of financial position under IFRS, shows what a business owns (assets), what it owes (liabilities) and the owners' residual interest (equity) at a single date. Assets always equal liabilities plus equity. It is a snapshot, unlike the income statement, which covers a period.
How it works
Assets and liabilities are split into current (expected to be settled within twelve months or the operating cycle) and non-current. Current assets include cash, receivables and inventory; non-current assets include property, plant and equipment and intangibles. Equity shows share capital, reserves and retained earnings.
Read it with questions in mind: can current assets cover current liabilities (working capital)? How much of the business is funded by debt versus equity? Are receivables or inventory growing faster than sales? The financial ratio calculator turns those questions into numbers.
Ledgeriano builds the statement of financial position from posted entries with a prior-year comparison column; the financial statements guide explains each line and how it links to the other statements.
Formula
Assets = Liabilities + Equity
Example: a simplified statement of financial position
A trading company at 31 December. Total assets of 210,000 equal liabilities of 85,000 plus equity of 125,000.
| Line | Amount |
|---|---|
| Property, plant and equipment | 90,000 |
| Inventories | 45,000 |
| Trade receivables | 40,000 |
| Cash and cash equivalents | 35,000 |
| Total assets | 210,000 |
| Bank loan (non-current) | 50,000 |
| Trade payables | 35,000 |
| Share capital | 60,000 |
| Retained earnings | 65,000 |
| Total equity and liabilities | 210,000 |