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A more accurate name for a balance sheet is statement of financial condition or statement of financial position, but the term balance sheet has caught on, and most people use this term. The most important thing is not the “balance” but rather the information reported in this financial statement.

In brief, a balance sheet summarizes on the one hand the assets of the business and on the other hand the sources of the assets. However, looking at assets is only half the picture. The other half consists of the liabilities and owner equity of the business. Cash is listed first, and other assets are listed in the order of their nearness to cash. Liabilities are listed in order of their due dates (the earliest first, and so on). Liabilities are listed ahead of owners’ equity. We discuss the ordering of the components in a balance sheet in Chapter 7.