A balance sheet shows the assets, liabilities, and net worth of an individual or entity at a given point in time. In other words, it is a snapshot or statement of financial position on a specific date.

Components of Balance Sheet

Define Assets

Assets are items that are owned and have value. Assets would include cash, investments, money that is owed to the person or entity (accounts receivable), inventory of items for sale, supplies, pre-paid expenses, land, land improvements (buildings), equipment, etc.

Define Liabilities

Liabilities are obligations or items that are owed to others. Liabilities are the accounting opposite of assets. Liabilities would include accounts payable, accrued interest and principle on bonds issued, accrued interest and principal on mortgages outstanding, etc.

Define Net Worth Calculation

Assets – Liabilities = Net Worth

Net worth is the total assets minus total liabilities of an individual or entity. Net worth may also be referred to as book value or owner’s (stockholders) equity. In other words, net worth is the accounting value of an individual or entity if all assets were sold and liabilities were paid in full on a specific date.