Balance sheet
Balance sheet reports the financial position of a business at a single point in time, not over a period. It presents the accounting equation: assets on one side, liabilities and owners' equity on the other, with both totals always matching.
Also known asstatement of financial position
See it move
A balance diagram shows Assets of €120,000 on the left exactly equalling the combined total of Liabilities (€70,000) and Equity (€50,000) on the right. The equality holds at any reporting date without exception because every transaction affects both sides of the equation by equal amounts.
The formula
Variables
- Total assets (€)
- Total liabilities (€)
- Owners' equity (€)
The balance sheet is a formal statement of the accounting equation at a specific date.
Check yourself
At year-end, a company's balance sheet reports total assets of €150,000 and total equity of €60,000. What is the total liabilities figure, and which relationship makes this calculable?
If you trained under a national GAAP
DE · HGBWhere national-GAAP intuition diverges from the international standard
HGB (German)
HGB prescribes a fixed balance sheet format with defined classifications and sequencing, and requires most assets to be measured at historical cost net of accumulated depreciation. Upward revaluation to reflect increases in fair value is not permitted for most asset categories; the prudence convention allows write-downs when value falls but prohibits write-ups when market value subsequently recovers beyond depreciated cost.
IFRS
IFRS specifies minimum required line items and disclosures rather than a fixed presentational layout, giving preparers considerable flexibility. Several standards — covering investment property, certain financial instruments, and property, plant and equipment under the revaluation model — require or permit carrying assets at fair value, so the balance sheet can reflect current market values rather than depreciated historical cost.