5.3.4 Balance sheet

Although we are not going to deal with balance sheets here in detail – that is considered to be something that should be dealt with by an accountant – a short description will be helpful.

A balance sheet matches (or balances) sources of finance to the resources funded by these sources of finance, at a particular point in time. It is customary to prepare one balance sheet at the start of a financial period and another at the end. If the net worth of an organisation increases or decreases during that period, the difference will be explained by what the profit-and-loss and cash flow statements tell us about operations and finances during the year. The balance sheet, profit and loss and cash flow are thus all interlinked.