The balance sheet is one of the three fundamental financial statements and is key to both financial modeling and accounting. The balance sheet displays the company’s total assets, and how these assets are financed, through either debt or equity. It can also be referred to as a statement of net worth, or a statement of financial position. The balance sheet is based on the fundamental equation: Assets = Liabilities + Equity.

As such, the balance sheet is divided into two sides (or sections). The left side of the balance sheet outlines all of a company’s assets. On the right side, the balance sheet outlines the companies liabilities and shareholders’ equity. On either side, the main line items are generally classified by liquidity. More liquid accounts such as Inventory, Cash, and Trades Payables are placed before illiquid accounts such as Plant, Property, and Equipment (PP&E) and Long-Term Debt. The assets and liabilities are also separated into two categories: current asset/liabilities and non-current (long-term) assets/liabilities.