🏠 Understanding the Balance Sheet: Your Business is Like a House

Imagine your business as a house. To understand its financial health, you take a snapshot on a specific date — like a photo of everything you own, owe, and what’s truly yours.

Just like a house inspection, we freeze everything on this day to check your financial picture.

🧱 PARTS OF YOUR HOUSE (Balance Sheet)

1. ASSETS = What Your House Owns

Think of these as your stuff — things you own that have value.

2. LIABILITIES = What Your House Owes

These are obligations — debts to outsiders, like loans or bills.

3. OWNER’S EQUITY = Your Share in the House

What’s truly yours after paying off what you owe.

🔑 Key Formula

Assets = Liabilities + Owner’s Equity
₹1,20,000 = ₹60,000 (Equity) + ₹60,000 (Liabilities)

It balances, just like a well-built house! 🏡

🎯 Real-Life Example:

If you sold everything (assets) for ₹1,20,000, you’d use ₹60,000 to pay off debts (liabilities), and the remaining ₹60,000 would be yours — your equity!

✅ WHY IT MATTERS?

• Helps investors see if your business is healthy.

• Shows how much debt vs. ownership is in the business.

• Used for planning, loans, and growth decisions.

📌 Final Tip:

A balance sheet is not about profit — it’s about POSITION.
It shows where your business stands, not how much money it’s making.