Glossary
What is a balance sheet?
A snapshot of the business on one date: what it owns, what it owes and what is left for the owners.
Updated
In short
A balance sheet shows what a business owns, owes and holds for its owners on a given date, with assets equal to liabilities plus equity. SimpleERP builds it from the same ledger as every report, for any date.
A balance sheet is a statement of what a business owns, what it owes and what belongs to its owners on a given date. Assets always equal liabilities plus equity. It differs from a profit and loss statement, which covers a period, because it is a snapshot of position at one moment, such as 31 March. Banks and investors read it to judge stability.
Balance sheet: a worked example
Lakshmi Steel Furnitures, a private limited company, on 30 September 2026, half way through financial year 2026-27:
| Assets | Amount | Liabilities and equity | Amount |
|---|---|---|---|
| Fixed assets (net) | ₹6,80,000 | Accounts payable | ₹1,92,400 |
| Stock | ₹4,85,000 | GST payable | ₹45,600 |
| Accounts receivable | ₹2,14,800 | Term loan | ₹3,00,000 |
| Bank and cash | ₹2,71,000 | Share capital | ₹5,00,000 |
| Retained earnings, prior years | ₹2,00,000 | ||
| Profit, April to September | ₹4,12,800 | ||
| Total | ₹16,50,800 | Total | ₹16,50,800 |
Why does a balance sheet always balance?
Because every transaction is recorded twice, as a debit and a credit. A ₹3,00,000 loan adds ₹3,00,000 to the bank and ₹3,00,000 to liabilities. A sale adds to receivables and to profit, which belongs to equity. If it does not balance, an entry was posted on one side only.
FAQ
Questions, answered
What is the difference between a balance sheet and a P&L?
The P&L covers a period and shows income, expenses and profit. The balance sheet is one date and shows assets, liabilities and equity. They connect: the period's profit from the P&L appears in equity on the balance sheet at the period end.
Does a small proprietorship need a balance sheet?
If you are required to maintain books and get them audited, or apply for a bank loan, yes. Even when it is not mandatory, it is the only report that shows your stock, dues and debts together, which is what a lender or a buyer of the business will ask for first.
Why is my stock on the balance sheet different from my stock list?
Usually because stock was adjusted outside the stock records, by a manual journal to the inventory account, or because it is valued differently. When stock moves only through invoices, bills and adjustments, the stock list and the inventory account show the same figure.
Can I see the balance sheet for any date?
In software that builds it from posted entries, yes. Pick 31 March for the year end or any other date for a bank's request. The figures come from the same journal lines, so the balance sheet on a date always matches the trial balance on that date.
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