What is a balance sheet?
- By Book Keeping Pros
- Sources checked 15 Oct 2026
Definition
A balance sheet is a snapshot of a business's financial position at a particular date. It lists what the business owns (its assets) and what it owes (its liabilities), and the difference between the two is its net assets, also called owner's equity.
Assets and liabilities are split into current and non-current items. Current assets include cash and items expected to be sold, collected or used up in the normal operating cycle or within 12 months. Current liabilities include obligations expected to be settled in that cycle or due within 12 months. Comparing the two is a first check on whether the business can meet its short-term debts.
Unlike a profit and loss statement, which covers a period, a balance sheet shows one moment, usually the last day of a month or of the financial year.
In Australia
business.gov.au publishes a free balance sheet template. It groups current assets, such as cash, inventory and prepaid expenses, then fixed assets, current liabilities, such as credit cards, accounts payable and accrued wages, and long-term liabilities such as loans. Net assets are total assets minus total liabilities.
It also notes that a balance sheet can help you work out your working capital, the money needed to fund day-to-day operations, and how quickly you could pay your current debts.
Worked example
| Item | Amount (AUD) |
|---|---|
| Current assets | 18,500.00 |
| Fixed assets | 42,000.00 |
| Total assets | 60,500.00 |
| Current liabilities | 9,300.00 |
| Long-term liabilities | 20,000.00 |
| Total liabilities | 29,300.00 |
| Net assets | 31,200.00 |
Illustrative example only: these rows show the method and are not sourced data.
Common mistakes
- Including the owner's personal assets or debts in the business balance sheet.
- Reading one balance sheet on its own instead of comparing it with an earlier date.
Related terms
Sources
- Set up a balance sheet
business.gov.au, Australian Government. Current at 15 October 2026, released 18 January 2024. Checked 15 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.
- Key financial terms
business.gov.au, Australian Government. Current at 15 October 2026, released 9 July 2024. Checked 15 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.