The balance sheet is often described as a “snapshot” of a company’s financial statement at a certain moment — usually, the last day of the company’s fiscal year. It is a key part of the company’s financial statements and shows the assets the company has available to undertake operations and its outstanding liabilities.

The balance sheet expresses the relationship between as-sets (what the company owns) and liabilities (what it owes). What is left over is shareholder’s equity, which is known, too, as ”net worth” or “book value.” Equivalently, it is share capital plus retained earnings minus treasury shares. Investopedia, the financial education website, defines shareholders’ equity as the amount by which a company is financed through common and preferred shares.

Or, expressed as a formula:

Current liabilities include accounts payable, short-term debt and the current portion of long-term debt, among other items. Non-current liabilities include notes and bonds payable, long-term debt and pension and post-retirement obligations, which may contain significant information.

Off-balance-sheet entities may be used to disguise losses or create false profits. For an introduction to off-balance-sheet entities — a favorite ploy in accounting fraud scandals in recent years — see: http://bit.ly/IvAFGS

For more detail on how to read and interpret a balance sheet, see: http://bit.ly/IFGGxw