6.14What is a Balance Sheet?
1What is it?
A balance sheet is a snapshot, on one date, of what a company owns (assets), what it owes (liabilities) and what belongs to the owners (equity).
2Why does it exist?
It shows financial strength: how much debt, how much cash, how much net worth.
3Diagram
| Assets (what it owns) | ₹ cr | Liabilities + Equity (how it’s funded) | ₹ cr |
|---|---|---|---|
| Cash & bank | 1,000 | Borrowings (debt) | 2,000 |
| Receivables | 1,500 | Payables & other | 1,500 |
| Inventory | 1,000 | Shareholders’ equity | 4,000 |
| Plant & machinery | 4,000 | ||
| Total | 7,500 | Total | 7,500 |
4Calculation
Assets = Liabilities + Equity
- ₹7,500 = ₹3,500 + ₹4,000
The sheet balances.
5Practical use
Check: Is debt rising faster than equity? Is cash healthy? Are receivables (money customers owe) growing much faster than sales? That could mean trouble collecting.
6Quick revision
- Snapshot on one date.
- Assets = liabilities + equity.
- Shows debt, cash and net worth.
7Knowledge check
Q1. Assets ₹100 cr, liabilities ₹60 cr. Equity?Show answer
₹40 cr.
Q2. Is a balance sheet for a period or a date?Show answer
A specific date.
Q3. Name two assets.Show answer
Cash, receivables, inventory, machinery, buildings.