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What is a balance sheet?

The balance sheet represents the assets, liabilities, and equity at a point in time (e.g. December 31st, Year 1) and not over a period of time (January 1, Year 1 to December 31st, Year 1). The balance sheet is a key part of a company’s financial statements, along with the income statement and statement of cash flows. It’s extremely important to remember that assets must equal liabilities plus equity. If those numbers do not equal each other, then you do not have a balanced balance sheet!

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