The Balance Sheet How Much Is It Worth

The balance sheet, which is one of two financial statements that define the financial condition of an organization, is prepared at regular intervals such as monthly, quarterly, and annually and meets internal and external needs as just discussed. The other financial statement is the income statement which is discussed in the next major section of this chapter. 

The balance sheet is referred to by other names such as financial statement, statement of financial condition, statement of worth, and statement of assets and liabilities (Clough et al 2005). The term balance sheet is used in this book because the term seems appropriately descriptive and because it is widely used in engineering literature (e.g.. Blank and Tarquin 2005, Clough et al 2005). 

The balance sheet shows, at a given time, assets (A), liabilities (L), and net worth (NW) or equity (E) in monetary terms. The basic equation for the balance sheet is  

To reiterate, a balance sheet is a snapshot of the financial condition of a person or organization at a specific point in time. While it shows the financial status at that instant, it does not indicate what financial transactions lead to the current situation. 

Two example balance sheets are used to illustrate the features and usefulness of balance sheets. The first is a hypothetical balance sheet for a young person s finances and the second is a hypothetical balance sheet for a construction company. The personal and business examples are intended to suggest the broad applicability of balance 

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