Balance Sheet

A condensed financial statement showing the nature and amount of a company´s assets, liabilities, and capital on a given date. It provides information about short-term and long-term debts, gearing (the ratio of debt to equity), reserves, stock values (materials and finished goods), capital assets, cash on hand, along with the value of shareholders´ funds. The term ´balance sheet´ is derived from the simple purpose of detailing where the money came from, and where it is now. The balance sheet equation is fundamentally: (where the money came from) Capital + Liabilities = Assets (where the money is now). Hence the term ´double entry´ - for every change on one side of the balance sheet, so there must be a corresponding change on the other side - it must always balance. The balance sheet does not show how much profit the company is making, as the profit and loss account does this, although pervious years´ retained profits will add to the company´s reserves, which are shown in the balance sheet.