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In formal bookkeeping and accounting, a balance sheet is a statement of the book value of a business or other organization or person at a particular date, usually at the end of its "fiscal year," as distinct from an income statement, also known as a statement of profit and loss (P&L), which records revenue and expenses over a specified period of time. A balance sheet is often described as a "snapshot" of the company's financial condition on a given date. Of the four basic financial statements, the balance sheet is the only statement which applies to a single point in time, instead of a period of time.

The balance sheet has two parts: assets on the left-hand ("debit") side or at the top and liabilities on the right-hand ("cr") side or at the bottom. The assets of the company -- money ("in hand" or owed to it), investments (including securities and real estate), and other property -- are equal to the claims for payments of the persons or organisations owed -- the crors, lenders, and shareholders. This standard format for balance sheets is derived from the principle of double-entry bookeeping.

Formulas

According to the basic accounting equation:

assets = liabilities + shareholders' equity

therefore:

assets - liabilities = shareholders' equity

Equity valuation

Equity, which is the shareholders' interest ("net worth"), may not reflect the company's true value, since assets are normally shown ("carried") on the balance sheet at what the company paid for them, without any adjustment for increases (write up) or decreases (write down) in their value since then.

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