The Balance Sheet

A balance sheet is a snapshot of a company's financial situation at a given point in time. Profits are reported in the income statement, while financing and investing activities are in the cash flow statement. Accountants can create a balance sheet whenever a manager requests one.

A balance sheet is a snapshot of a company's financial situation at a given point in time. An accountant reports on the activities of a business in two distinct groups. They are profit-generating activities that include both sales and expenses. This is also known as operational activities. Financing and investing activities include obtaining funds from debt and equity sources of capital, returning capital to these sources, distributing profits to owners, investing in assets, and eventually disposing of the assets.

Profitable activities are reported in the income statement, while financing and investing activities are reported in the cash flow statement. In other words, separate financial statements are prepared for the two types of transactions. In addition to the amount of profit reported in the income statement, the statement of cash flows reports the cash increase or decrease from profit during the year.

The balance sheet differs from the income and cash flow statements, which report on cash income and cash outflows, respectively. The balance sheet shows the current balances, or amounts, of a company's assets, liabilities, and owners' equity. At different times, the word balance has different meanings. It refers to the balance of the two opposing sides of a business, total assets on one side and total liabilities on the other, as used in the term balance sheet. 

The balance of an account, such as the asset, liability, revenue, and expense accounts, on the other hand, refers to the amount in the account after recording increases and decreases in the account, similar to the balance in your checking account. Accountants can create a balance sheet whenever a manager requests one. However, they are usually prepared at the end of each month, quarter, and year. It is always prepared at the end of the profit period, at the close of business.