Balance sheet

A snapshot at one moment of what you own (assets), what you owe (liabilities), and the difference (equity).

Example

$300k cash and $60k receivables against $40k payables leaves $320k of equity.

Important

Assets always equal liabilities plus equity. If it does not balance, something is wrong with the books, not with the business.

Related terms

  • Income statement (P&L) — A statement of revenue, costs and profit over a period. Revenue − COGS = gross profit; gross profit − OpEx = operating profit.
  • Cash flow statement — Where cash actually came from and went, split into operating, investing and financing activities.
  • Equity — Ownership in the company, usually held as shares.

Lessons that explain it

  • Bookkeeping, accounting and when you need a person — Software handles bookkeeping. A human is worth it for tax, equity and anything with a filing deadline. (12 min)
  • Reading a balance sheet — What you own, what you owe, and what is left. A snapshot rather than a period — and the one that has to balance. (10 min)

All 176 terms in the Founder glossary