A balance sheet is a financial statement showing what a business owns, what it owes, and the owners' equity at a single point in time.
The balance sheet is built on one equation: Assets = Liabilities + Equity. It always balances because everything the business owns was funded either by borrowing (liabilities) or by the owners (equity). Unlike the income statement, which covers a period, the balance sheet is a snapshot on a specific date.
In Canada the balance sheet, formally the statement of financial position under IFRS, is a required part of a corporation's financial statements and feeds the GIFI schedule on the T2 return. Lenders read it closely to judge solvency, and it is the starting point for most tax and financing decisions.
A company with $80,000 in assets (cash, receivables, equipment), $30,000 in liabilities (a loan and payables), reports $50,000 in equity. The two sides balance: $80,000 = $30,000 + $50,000.
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