Balance sheet 101

The balance sheet is one of the most important financial statements for an investor to take into consideration. Although this accounting statement may seem difficult to comprehend at the first glance, it is actually a very simple statement if you know what you're looking for. Before we start discussing how to read a balance sheet, we should first know what exactly a balance sheet is. So, what is a balance sheet? A balance sheet is a very simple financial statement designed to give readers information about three things - the money available to the company, outstanding loans and the difference between these two. Let's look at a simple balance sheet of an imaginary company - ABC Limited: Bank balance = Rs 10,000; money borrowed from a friend = Rs 2500 and the difference between these two numbers is Rs.7,500. This simple balance sheet tells us that the company ABC Limited has Rs 10,000 but has to repay Rs 2500 to its friend and therefore, has a net amount of Rs 7,500. Sounds simple? That's all about the balance sheet. Investors should remember that though complicated terms, such as assets (which refers to Rs 10,000 here), liabilitie