How the Balance Sheet Works | Understand the Statement of Financial Position

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Find out how a balance sheet works with this special demo!
The balance sheet is one of the three main financial statements and it provides information about a company’s financial position at a certain point in time. If you want to understand the financial health of a business that’s the place to start. However, please note that’s it’s just a snapshot a certain point in time: It does NOT show the flows into and out of the accounts during the period.

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The balance sheet provides information on the company’s Assets, Liabilities and Equity. Assets are the resources the company owns and uses, and Liabilities is what it owes to others. Equity is the difference between total assets and total liabilities. This leftover money belongs to the owners of the company. Therefore, the more assets a company has and the smaller its debt, the bigger equity will be.

It all comes back to the main accounting equation: Assets equal Liabilities plus Equity or if we rearrange: Equity equals Assets minus Liabilities. A higher value for assets, a lower value for liabilities equals higher equity.

Link to Accounting Basics video:    • Accounting Basics Explained Through a...  
Link to Controller Institute that gave me the Demo idea (Christian Kreuzer): https://www.controller-institut.at/

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