A balance sheet is one of the four main financial statements produced by organizations and shows the resources owned (assets) and owed (liabilities) by the organization at a point in time that are recognized using the accounting conventions adopted by the entity.
It also shows the excess (or deficit) of resources recognized over recognized commitments by imposing the accounting identity:
A = L + E
Re-arranging gives:
E = A - L
Here is an example of a for-profit:
To apply the accounting identity to a not-for-profit, simply rename Equity to Net Assets (NA):
A - L = NA
Here’s an example of a not-for-profit:
Now let’s dig further into the three parts of the balance sheet: assets, liabilities, and stockholder equity (for-profit) or net assets (not-for-profit).