What the business owns, owes, and is worth — at a single moment.
The balance sheet is a snapshot of the business at one moment: assets (what it owns), liabilities (what it owes), and equity (what's left for the owners). It's the accounting equation — assets = liabilities + equity — formatted as a report, and it must always balance.
Where the P&L tells you how the business performed over a period, the balance sheet tells you where it stands. Lenders read it for solvency, buyers read it for substance, and good bookkeepers read it monthly for anomalies — negative balances and accounts that never move are cleanup flags.
As of June 30: $18,000 cash + $6,000 receivables + $10,000 equipment = $34,000 assets. Against that: $4,000 credit card + $10,000 loan = $14,000 liabilities, leaving $20,000 equity. 34 = 14 + 20 — balanced.
Profit & Loss Statement (Income Statement) · Owner's Equity · Current Liabilities — or browse the full plain-English glossary.
Reading a definition is the easy part — the Daily Challenge (ten questions a day, free, no signup) is how terms like this become reflexes. Going for certification? Start with the free ProAdvisor readiness check.