Balance sheet
AccountingDefinition
The balance sheet is a financial snapshot of a company at a single point in time. It answers three questions: What does the company own? What does it owe? And what's left for shareholders?
It has three sections that must always balance:
Assets (left side) - Everything the company owns. Split into current assets (cash, receivables, inventory - things convertible to cash within a year) and non-current assets (property, equipment, patents, goodwill).
Liabilities (right side, top) - Everything the company owes. Current liabilities (payables, short-term debt due within a year) and long-term liabilities (bonds, mortgages, lease obligations).
Equity (right side, bottom) - What's left after subtracting liabilities from assets. This is what shareholders actually own. Includes retained earnings (accumulated profits not paid as dividends) and paid-in capital (money raised from selling stock).
The fundamental equation must always hold: Assets = Liabilities + Equity. Every transaction affects at least two items to keep it balanced - this is the foundation of double-entry bookkeeping, invented in 1494.
It has three sections that must always balance:
Assets (left side) - Everything the company owns. Split into current assets (cash, receivables, inventory - things convertible to cash within a year) and non-current assets (property, equipment, patents, goodwill).
Liabilities (right side, top) - Everything the company owes. Current liabilities (payables, short-term debt due within a year) and long-term liabilities (bonds, mortgages, lease obligations).
Equity (right side, bottom) - What's left after subtracting liabilities from assets. This is what shareholders actually own. Includes retained earnings (accumulated profits not paid as dividends) and paid-in capital (money raised from selling stock).
The fundamental equation must always hold: Assets = Liabilities + Equity. Every transaction affects at least two items to keep it balanced - this is the foundation of double-entry bookkeeping, invented in 1494.
How it works
Formula
Assets = Liabilities + Equity
Example
Simplified Apple balance sheet (FY2025):
• Total assets: $365B (cash $30B, investments $100B, PP&E $45B, etc.)
• Total liabilities: $303B (debt $97B, payables $69B, etc.)
• Equity: $62B ($365B − $303B)
Apple has $4.90 of liabilities for every $1 of equity - highly leveraged, but supported by massive cash generation.
• Total assets: $365B (cash $30B, investments $100B, PP&E $45B, etc.)
• Total liabilities: $303B (debt $97B, payables $69B, etc.)
• Equity: $62B ($365B − $303B)
Apple has $4.90 of liabilities for every $1 of equity - highly leveraged, but supported by massive cash generation.
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