What is the main purpose of a Balance Sheet?

The main purpose of a Balance Sheet is to provide a comprehensive summary of a company's financial position at a specific point in time by detailing its assets, liabilities, and equity. This financial statement serves as a snapshot of what the company owns and owes, as well as the shareholders' equity, allowing stakeholders to assess the company's net worth and financial stability.

By presenting this information, the Balance Sheet helps investors, creditors, and management make informed decisions regarding the company's financial health. It reflects the accounting equation: Assets = Liabilities + Equity, effectively illustrating the relationship between what the company controls and what it is obligated to pay.

This contrasts with other financial statements that focus on different aspects of the company's financial performance. For instance, statements that show income and expenses during a specific period focus on earnings, while cash flow statements detail cash movements rather than the overall financial position represented in a Balance Sheet.