Balance Sheet

First thing asked for by a potential investor

Used by the owners when they are trying to craft a better and more effective organizational strategy

Used by employees who need to adjust their work processes for them to reach or achieve shared organizational goals

Knowing how to read and understand a balance sheet is highly important and a compulsory business/financial/accounting skill

A financial document that helps to understand the worth of an organization, aka, its book value

Tells us about the true book value of an organization by listing out all of the company’s assets, liabilities, and owner’s equity

A balance sheet may be prepared as per the desired frequency of an organization; it could be monthly, bi-monthly, quarterly, bi-annually, or annually

Reviewed internally by the owners, key stakeholders, managers, and all the way down to employees to provides a clear insight into whether a company is doing good or failing to meet its business objectives

Reviewed externally by a potential investor or someone interested to buy the company as a balance sheet is designed such that it provides insights into the resources that are owned by the company, available to it, and how are/were they financed in the first place

Viewed by auditors to make sure that a company complies with local laws and following all the reporting laws that it is legally subjected to

Assets = Liabilities + Owner’s Equity

Liabilities = Assets – Owner’s Equity

Owner’s Equity = Assets – Liabilities

When there is incomplete, incorrect, or insufficient data

When the transactions have been entered incorrectly

If there are any errors in the currency exchange rates

Errors in the calculation of inventory levels

If or when the equity has been calculated incorrectly

When there has been a miscalculation of amortization or depreciation

Assets: Represent all that is owned by an organization. All of these resources or objects hold characteristic and/or calculable value.

Liabilities: Represent legal and financial obligations that an organization is bound to pay to the entity it owes that amount to

Owner's Equity: All that which is left or owned by the owner after all the liabilities have been paid