A balance sheet is a financial report that gives an account of the state of the economy and finances of an institution at a time or during a certain period.
The balance sheet, also known as a statement of financial position or balance sheet, is a set of data and information presented as a final document that includes an overview of the financial situation of an entity or company and that often takes place once year. The balance sheet or statement of position combines in itself the concepts of assets, liabilities and net worth, as the three fundamental elements that make up the accounting of an institution.
The first of these, assets, deals with the securities accounts that the company has, that is, items that can generate income through use, sale or exchange.
Liabilities, on the other hand, constitute the obligations and contingencies to which attention must be paid, such as loans, purchases and other medium or long-term transactions. Finally, equity represents assets less liabilities, that is, contributions from shareholders and other investors that, ultimately, account for the company's self-financing capacity.
Assets include all those accounts that reflect the values held by the entity. All assets are likely to bring money to the company in the future, either through use, sale or exchange. On the contrary, the liability shows all the certain obligations of the entity and the contingencies that must be recorded. These obligations are, of course, economic: loans, purchases with deferred payment, etc.
In other words, the net worth that will be the key axis of the balance sheet is a conclusion between what the company has, what it owes and, therefore, what it authentically owns, that is, the final state of its accounting.
