---
title: "Balance sheet (statement of financial position)"
description: "What a balance sheet (statement of financial position) shows, its sections, the accounting equation behind it, an IFRS-style example and how to read it quickly."
canonical: https://ledgeriano.com/glossary/balance-sheet
language: en
publisher: "Ledgeriano"
updated: 2026-11-06
---

# Balance sheet (statement of financial position)

> What a balance sheet (statement of financial position) shows, its sections, the accounting equation behind it, an IFRS-style example and how to read it quickly.

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.

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](https://ledgeriano.com/glossary/retained-earnings).

Read it with questions in mind: can current assets cover current liabilities ([working capital](https://ledgeriano.com/glossary/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](https://ledgeriano.com/tools/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](https://ledgeriano.com/guides/financial-statements) explains each line and how it links to the other statements.

```
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** |

### Why does the balance sheet always balance?

Every transaction is recorded with equal debits and credits, so the accounting equation holds after each one. Profit for the year flows into equity, closing the loop with the income statement.

### What is the difference between a balance sheet and a statement of financial position?

None in substance. IFRS uses "statement of financial position"; "balance sheet" remains the common name and is used in US GAAP.

Guide: https://ledgeriano.com/guides/financial-statements