SAP End to End Processes Practice Test 2026 - Free SAP Practice Questions and Study Guide

The balance sheet is the financial statement that provides a snapshot of a company's assets and liabilities at a specific point in time. It is structured around the accounting equation: Assets = Liabilities + Equity. This equation reflects the fundamental principle of finance that all resources owned by a company (assets) are financed either by borrowing (liabilities) or by contributions from owners (equity).

In a balance sheet, assets are typically listed on one side and include items such as cash, inventory, and property. Liabilities, which encompass debts and obligations owed to external parties, along with equity on the other side, complete the financial picture. This dual aspect allows stakeholders to assess the financial health of the business, liquidity position, and leverage.

Other financial statements serve different purposes; for instance, the income statement reflects a company's performance over a period, detailing revenues and expenses, which shows profitability but does not provide a snapshot of financial position. The cash flow statement tracks the inflows and outflows of cash over a period, focusing on liquidity rather than position. The statement of changes in equity records the variations in equity components over a period, primarily addressing how profits are retained or distributed but not giving an immediate view of assets and liabilities.