APT Initiatives
APT Business & Economics Resources
Minimising Workloads, Maximising Performance
Established in 1999

Special Items

Balance sheet

A snapshot of a firm’s worth / financial position at a particular moment in time. It shows what the business owns (assets) in monetary terms, and from where funds have been obtained to purchase what it owns (capital and liabilities). See assets, capital, liabilities. The value of assets should always equal capital and liabilities. This is known as the accounting equation. This is because the money used to purchase an asset has to come from somewhere – either through owner’s capital, ie money put into or kept in the business by the owner(s), or borrowed from others, ie liabilities. The balance sheet is one of the most important business documents, along with the income statement (profit and loss account). Both these documents are produced to help decision-making and are essentially used, not only by management to assess the financial performance of the business, but potential lenders and investors, to assess the business’s stability and ability to repay moneys borrowed, and the likely return on their investment. In the same way that a business hopes to make a profit each year, it also aims to have assets greater than liabilities. Once profit has been earned, this makes the business worth more than before – representing business growth.

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